Nvidia beats earnings, but stock falls

Nvidia Corporation reported impressive fourth-quarter results for fiscal year 2025, with revenue reaching $39.3 billion, a 78% increase from the same period last year. Net income stood at $22.06 billion, reflecting strong demand for the company's Blackwell AI chips, particularly among major cloud service providers. The company's gross margin guidance of 70.6% GAAP and 71.0% non-GAAP raised questions among analysts, primarily due to increased production costs associated with accelerating Blackwell systems and chips.

• While Nvidia’s revenues and earnings both beat expectations, margins slightly missed expectations
• The stock sold off over 8% the following day, with many attributing the decline to the slight decline in margins
• However, the company is still generating extremely impressive growth and very high margins
• When a stock like this fails to rally on positive news, it may be a sign of changing in the underlying sentiment for certain parts of the market
• We could be witnessing a turn in sentiment for the Mag 7 stocks that have been driving much of the market’s return for the last few years

One Fed measure shows the economy contracting

The Atlanta Federal Reserve's GDPNow model has revised its first-quarter 2025 real GDP growth estimate to a contraction of 1.5%, a significant downgrade from the previous 2.3% growth forecast. This adjustment is largely attributed to a sharply higher trade deficit reported for January, as increased imports have a negative impact on GDP calculations. The negative outlook suggests potential challenges ahead for the U.S. economy, marking the first anticipated quarterly decline since early 2022.

• We have been witnessing some weak economic data recently, so this wasn’t completely unexpected and is just one measure
• When you look at the calculation of this model, most of the weakness can be attributed to a sharply higher deficit
• This is logical, given Trump’s tariff talks, many would accelerate imports in order to avoid future tariffs
• More concerning, however, was that consumption declined, even though personal income was higher
• This would mean consumers chose to save rather than spend
• This was further corroborated by the consumer confidence number, released earlier this week, which declined for the third consecutive month

Crypto weakness

The cryptocurrency market has experienced significant volatility so far in 2025, with Bitcoin down approximately 10% year-to-date after briefly surpassing $95,000 in January before retreating to around $84,000. Ethereum has fared even worse, falling over 30% since the start of the year, as it struggles with a recent exchange hack and community drama. Despite the sharp declines, trading volumes remain elevated as both institutional and retail investors attempt to navigate the uncertain macro and crypto-specific environment.

• We believe the recent weakness in crypto markets is due to a combination of several factors
• This week, it was revealed that an off-shore exchange was hacked, losing $1.5bn of Ethereum to a North Korean hacking group, which shakes confidence
• But more importantly, there are signs that liquidity is draining from the most speculative assets
• If you look at the performance of stocks like Tesla and Palantir, you see similar patterns
• Specific to Ethereum, there has also been a lot of strife in the community, with many questioning the leadership of the Ethereum Foundation and the future plans of the network

‍