Thanks to the stunning financial outlook presented on Wednesday by the chip company
On Thursday, investors zealously took on cloud gaming and artificial intelligence.
Nvidia jumped 24% on Thursday, pushing its valuation near the $1 trillion range. Other big winners included
(ANET), which makes the communications hardware used in cloud computing and
(AMD), a chip company making a big push in AI-related processors, both up 11%.
(ADBE), which adds generative AI tools to its creative software suite, grew 7%,
(TSM), which actually makes AI-targeted chips for Nvidia, added 12%.
Nvidia said it was seeing an increase in order activity from cloud companies, which would imply strong activity for those companies, and in fact,
(GOOGL) increased by 2%,
(MSFT) rose 4%, and
(ORCL) increased by 6%.
(AMZN), parent company of Amazon Web Services, the largest cloud service provider, was down 1.5%. A kind of head scratcher.
So here’s what’s going on.
Rather than sacrificing Nvidia’s earnings, the stock looks more tied to the disappointing forecast presented Wednesday night by
As I noted in an article analyzing Snowflake’s outlook issues, Chief Financial Officer Mike Scarpelli said on the company’s earnings conference call that some large clients have taken a fresh look at their data retention and have decided to delete obsolete and less valuable data.
“It lowers their storage bill and lowers compute costs,” he said. And although Scarpelli didn’t say, Amazon provides these companies with storage and computing services.
Redburn analyst Alex Haissl argues there are two reasons why Amazon was shut out of Thursday’s massive rally in tech stocks in general and cloud and artificial intelligence stocks in particular.
“First, the market wants to draw a negative inference from the Snowflake warning, given that most of their customers operate on AWS,” he wrote in response to a query from Barrons “Therefore, any reduction in Snowflake usage leads to a reduction in AWS usage.”
And second, he says, “there is a perception that Microsoft, Google, and Oracle are reaping greater benefits from Nvidia, as AWS gradually transitions to using their own AI chips,” known as of Tranium and Inferentia. But Haissl adds that he disagrees and says the market’s concerns about both issues are overblown.
Jordan Klein, Baird’s managing director who writes a daily morning commentary on the outlook for tech stocks, made similar remarks in response to a question from Barrons. He thinks Snowflake’s negative comments on consumer trends, which suggested April’s weekly growth was zero, are seen as a negative sign for companies with consumer-driven business models, like Snowflake.
Klein also notes that during Nvidia’s conference call on Wednesday, CEO Jensun Huang talked about the company’s partnerships with Microsoft Azure, Google Cloud and Oracle Cloud, without saying as much about AWS.
Ultimately, on a day when cloud and AI stocks went wild, investors left out the biggest cloud player of them all.
Write to Eric J. Savitz at firstname.lastname@example.org