Expectations moved Nvidia’s shares in strange ways

This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

Markets digest Nvidia earnings 
U.S. markets rose on Thursday after digesting Nvidia’s earnings release. Its shares rose just 0.5%. Alphabet slumped 4.7% on the U.S. Department of Justice calling for Google to divest Chrome. Asia-Pacific stocks traded mixed on Friday. Japan’s Nikkei 225 added 0.87% on the release of inflation data, while Hong Kong’s Hang Seng index sank 1.58%.

Headline inflation in Japan falls
Japan’s inflation in October dropped to 2.3% from 2.5% in September. However, “core-core” inflation, a reading that excludes fresh food and energy prices and is tracked by the Bank of Japan, rose to 2.3% from 2.1% the previous month. More than half of economists polled by Reuters expect the BOJ to hike rates by 25 basis points in December.

Aftereffects of Adani allegations
On Thursday, the Adani Group denied allegations of bribery and fraud made by U.S. authorities in relation to the group’s chair Gautam Adani, calling them “baseless.” Still, the mere existence of those allegations could dampen investors’ enthusiasm on Indian markets and put regulators in India under scrutiny, writes CNBC’s Ganesh Rao.

Foreign automakers need to partner Chinese ones
Automakers across the world, such as U.S.’ General Motors, Germany’s Volkswagen and Japan’s Nissan, are experiencing slumping sales in China, whereas domestic carmakers like BYD and Geely are dominating the Chinese market. To survive in China, foreign automakers need to partner with Chinese companies, analysts say.

[PRO] Stimulus boosting Chinese markets
Chinese markets are “turning a corner” after the Beijing unleashed several stimulus measures to boost the economy, said HSBC. “The market has so far reacted positively to these initiatives,’ analysts from HSBC wrote in a Nov. 19 note, in which they picked two Chinese stocks to hold for 2025.

With Nvidia’s earnings out of the way, markets can return to a semblance of regular programming after a month of frenzy that included the U.S. presidential elections, the Fed bringing rates down by 25 basis points, Russia ratcheting up its nuclear rhetoric, to mention just a few events. 

U.S. markets took everything in their stride and took a few steady steps forward on Thursday. The S&P 500 rose 0.53%, the Dow Jones Industrial Average climbed 1.06% and the Nasdaq Composite was mostly flat. 

“I think markets are finally finding their footing for two reasons: One is recovery from that postelection hangover after the first week, and [two is] reaction to Nvidia’s earnings,” Nuveen CIO Saira Malik told CNBC. 

Nvidia reported an incredible – by most standards – third-quarter financial report. Its revenue almost doubled year on year and net income soared. 

But we know already investors’ bar for Nvidia is somewhere beyond the stratosphere. Impressive as Nvidia’s earnings are, investors were still put off by a combination of the chipmaker’s slowing rate of growth and a relatively conservative projection for its sales ahead. 

Nvidia shares ticked up just 0.5% after falling in premarket trading. 

By way of comparison, let’s look at data analytics software Snowflake. Its fiscal third-quarter revenue rose 28% year on year (remember that Nvidia’s jumped 94%) and the company’s net loss widened. But investors were so pumped they pushed up its stock 32.7% to give Snowflake its best day ever. 

That discrepancy might seem baffling. But it’s not unusual for the markets, where expectations dictate share movements.  

If investors expect a company to make a huge loss and it manages to make a dollar in profit, shares are likely to rise. An exaggeration, but still. That’s just regular programming for markets. 

— CNBC’s Jesse Pound, Samantha Subin and Alex Harring contributed to this report.