Tesla stock rose early Thursday—then fell. Investors can thank Nvidia for both things.
Shares of the electric-vehicle maker traded as high as $428.94 before closing at $395.04, down 2.2%. That’s the first close below $400 since September. The S&P 500 and Dow Jones Industrial Average, both higher early in the day, lost 1.6% and 0.8%, respectively.
Early on, the entire market seemed to breathe a sigh of relief after Nvidia’s fiscal third-quarter earnings report on Wednesday night. The AI chip maker reported sales of $57 billion, ahead of Wall Street’s $55 billion estimate. Revenue for the fourth quarter is expected to be about $65 billion, up from about $39 billion in the year-ago quarter. Analysts were projecting fourth-quarter sales of about $62 billion at the start of November.
The solid earnings report was needed. Fears of an AI bubble were spreading across Wall Street, wrote Wedbush analyst Dan Ives. Nvidia’s earnings were a “pop the champagne moment,” added Ives. “This is another validation point for the AI Revolution, and in our view, we are in the Top of the third inning of this AI game.”
Investors aren’t so sure, and gains didn’t last. Nvidia’s stock traded as high as $196 on Thursday before declining to $180.64, down 3.2%.
Why Nvidia’s earnings have an impact on the market, or Tesla, isn’t a mystery. AI and the Magnificent Seven have come to dominate the market, accounting for about 35% of the S&P 500’s $60 trillion market value.
Tesla, for its part, has become an AI stock, with investors believing AI-trained robots and cars will drive explosive growth in the coming years.
Tesla CEO Elon Musk and Nvidia CEO Jensen Huang took questions together at the U.S.-Saudi Arabia investment conference.
The talk was high-level. There was no meaningful discussion of products, timing, sales, or challenges. Both laid out an optimistic vision of how AI would change the world. Musk believes work will be “optional” one day. Huang believes people can be busier, but more productive, pursuing new, interesting ideas.
For investors, the talk was just another sign that AI is the future for Tesla. Its current $1.3 trillion valuation depends on it.
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