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• Nvidia's earnings result has significantly impacted global markets, causing drops in the US and Seoul.
• Despite beating market expectations, Nvidia's shares fell as investors expected better performance.
• Not all companies were negatively affected, with Hyundai Motor gaining 1.74% following a new business strategy announcement.
• The event underscores the influence of tech giants like Nvidia on global markets and the importance of investor expectations.

The global markets have been significantly impacted by the recent earnings result of Nvidia, the global artificial intelligence (AI) chip giant. The ripple effect of this announcement was felt across the globe, with significant drops in the US and Seoul markets.

The South Korean shares dropped more than 1 per cent after opening on Thursday, August 29, 2024. The benchmark Korea Composite Stock Price Index (KOSPI) fell 31.62 points, or 1.18 per cent, to 2,658.21 in the first 15 minutes of trading. This drop was a direct response to the Wall Street losses prompted by Nvidia's earnings result.

Overnight in the United States, the Dow Jones Industrial Average fell 0.39 per cent, with the S&P 500 losing 0.6 per cent. The tech-heavy Nasdaq composite slipped 1.12 per cent higher as well. Wall Street lost ground as Nvidia's closely followed second-quarter earnings result failed to impress investors, despite having beaten market expectations.

In Seoul, Samsung Electronics and chip rival SK hynix plunged 3.27 per cent and 6.36 per cent, respectively. Energy shares also extended losses from the previous session. Leading refiner SK Innovation shed 0.37 per cent, and S-Oil fell 0.16 per cent.

Market Reactions and Investor Expectations

However, not all companies were negatively affected. Top automaker Hyundai Motor added 1.74 per cent following the company's new mid- to long-term business strategy announced the previous day. Affiliate Kia also gained 0.86 per cent. The local currency was trading at 1,338.15 won against the US dollar, up 0.85 won from the previous session.

Nvidia reported $30 billion revenue for the second quarter ended July 28, up 15 per cent from the previous quarter and up 122 per cent from a year ago. However, the firm's shares fell after the announcement as analysts said it was less about just beating estimates as markets expect the company to perform even better.

Jensen Huang, founder and CEO of Nvidia, commented on the company's performance, "Hopper demand remains strong, and the anticipation for Blackwell is incredible. Nvidia achieved record revenues as global data centres are in full throttle to modernise the entire computing stack with accelerated computing and generative AI."

Historical Similar Events and Future Outlook

This event is reminiscent of similar instances in the past where the earnings results of tech giants have had a significant impact on global markets. For instance, in February 2024, Nvidia became the fastest firm ever to go from a $1trn to a $2trn stock market valuation. However, investors had been closely focused on the results amid fears that customers could slow their spending on chips.

The world's biggest tech companies, including Microsoft, Google, Meta, Tesla, and Amazon, have invested tens of billions of dollars, quarter after quarter, into Nvidia's powerful AI chips and software to get their ChatGPT-style AI models up and running. Despite the underwhelming earnings result, Nvidia's technology continues to be in high demand. The company's CEO, Jensen Huang, noted that supply for Hopper is becoming more available while Blackwell is still in short supply.

Despite beating market expectations, the company's shares fell as investors expected even better performance. This event serves as a reminder of the significant influence that tech giants like Nvidia have on global markets. It also underscores the importance of investor expectations and market sentiment in shaping the financial landscape.