Another tech tonic, Nvidia delivers

Making sense of the forces driving global markets

By Jamie McGeever, Reuters Open Interest Markets Columnist 

Stocks advanced solidly for a second day on Wednesday, powered again by a rebound in tech, while investors' appetite for assets that have been beaten down recently also extended to precious metals and bitcoin. 

More on that below. In my column today, I look at the 'AI doom bubble' and the proliferation of doomsday scenarios sketched out in long-form blogs online that have gone viral. Perhaps it's time to deflate this particular bubble? 

I'd love to hear from you, so please reach out to me with comments at jamie.mcgeever@thomsonreuters.com. You can also follow me at @ReutersJamie and @reutersjamie.bsky.social. 

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* Nvidia delivers

Nvidia's quarterly earnings now rival U.S. jobs and inflation data as among the most important market-moving releases in the world. The most valuable company in history, with a market cap of over $4 trillion, has just released its Q4 results. 

Once again, it looks like Nvidia delivered. Revenues of $68.13 billion beat forecasts, and the company said it expects that to rise to $78 billion this quarter, which would be higher than analysts' average estimate of $72.6 billion. 

* Surprises and non-surprises in Japan

Japan's government on Wednesday nominated two academics to join the Bank of Japan's board, both essentially seen as policy doves. This may come as a disappointment to those who thought the BOJ is finally on the path to policy normalization.

It isn't that surprising though. Prime Minister Sanae Takaichi was elected on a promise to spend big, and has nominated economic 'reflationists' to several other roles in government. What's more surprising is ex-BOJ chief Haruhiko Kuroda calling for more rate hikes and tighter fiscal policy.

* EM bullishness off the charts

Even the biggest emerging market bulls couldn't have predicted how explosive the start to this year would be. South Korean stocks are the standout, up 45% year to date, but the MSCI EM index is up 14%, and MSCI Asia ex-Japan is up 12%.

Financial conditions across EM are the loosest in four years, according to Goldman Sachs, with a virtuous cycle of strong domestic equity markets, a soft dollar and stable Treasuries feeding on itself. One might wonder, what is the circuit breaker, and when will it click?

In financial markets, nothing sells like doom. But recent fears about the disruptive potential of artificial intelligence have battered stock prices and investor sentiment so much that a reality check is warranted.

The widespread AI euphoria that swept over Wall Street for much of the last year was probably unjustified, but so too is the fear that has gripped investors recently, sending the U.S. software services sector down 20% in less than a month. 

These anxieties have been stoked by a series of viral long-form blog posts touting apocalyptic AI scenarios: millions of office jobs lost, spending power vanishes, demand is destroyed, the economy plunges into a deflationary tailspin, and stocks crash.  

To be sure, these posts only sketch out scenarios. They are not forecasts or predictions, and they are not backed by hard data. Why then are they having such a deep impact on market psychology and investor behavior?

Find ROI on the Reuters website, and join the debate on LinkedIn and X.