Mixed earnings, lower oil supplies and a great chip deal
How did Nvidia and Walmart perform this earnings season?
Earnings season is basically done, and it ended with two companies that capture this market almost perfectly: Nvidia and Walmart.
Nvidia delivered again. Revenue expectations were beaten. Data centre revenue hit another record. Margins (earnings as a percentage of revenue) held near 75%, which is almost absurd considering the size of the ramp. The company’s forecast for future earnings was solid. It also bought back a massive amount of its shares, because apparently, generating tens of billions in free cash flow is now just a normal quarter.
And yet, the stock did very little in the usually reactive after-hours market (the period of trading that happens after the major stock exchanges have closed). That’s not really a negative; it’s more a comment on expectations. Nvidia has become the most important stock in the world, which also means that a great quarter is no longer enough to shock anyone. The bar is just sitting somewhere in the stratosphere.
Walmart told the other side of the story. Sales were strong, e-commerce and advertising kept growing, and the consumer is clearly still showing up. But its forecast for future earnings was weaker than expected, and management pointed directly to higher gas prices. Tax refunds may have cushioned the blow in Q1; that support is fading in Q2.
Are oil inventories falling?
Oil prices dropped Wednesday, after U.S. President Trump said the Iran war could end very quickly and that oil prices would “plummet”. A few tankers also moved through Hormuz, which helped the market price in some chance of de-escalation.
Fine: headlines can move the price of crude.
But the inventory data did not exactly scream abundance. U.S. crude inventories fell sharply again. Gasoline stocks posted another weekly decline. The SPR (Strategic Petroleum Reserve, the U.S.’s stockpile of petroleum) is being drained at a record pace. Total crude stocks, including the SPR, are back near the lowest levels in about a year.
So, we have two stories at once. The political story says relief is possible. The physical market says supply is still tight. The more interesting part is the equity reaction. A few weeks ago, every oil headline had the same playbook: oil up, stocks down, bonds down, Toronto Stock Exchange up. That now looks tired. Even with oil moving around violently, equity markets are no longer behaving like every Iran headline is a new regime. Maybe investors are getting used to the noise. Maybe positioning has already adjusted. Or maybe the market simply wants confirmation before it panics again.
What happened with Samsung?
Samsung reached a tentative deal with its main union and avoided a strike that could have hit the world’s largest memory-chip producer. Memory is already tight, given that AI data centre demand is enormous. Prices have been moving higher, and procurement risk is real. The last thing this market needed was a major labour disruption at Samsung.
The deal is rich: higher wages, better benefits and a new profit-linked bonus system that could lead to massive payouts if the semiconductor division hits its targets. For factory workers, this could lead to a CA$450,000 bonus for each employee. The South Korean index rose no less than 8% on the news.
What are the markets focused on now?
Earnings season is now mostly behind us and it was truly exceptional. Around 22% earnings growth over the last year is not a normal quarter; it’s one of the strongest earnings backdrops in modern U.S. market history.
Next week brings the usual macro data, but nothing that feels outstanding. With the flood of incredible earnings data now behind us, markets will probably go back to watching the two things that can still spoil the mood: oil prices and bond yields.
Listen to the latest podcast from the IG Investment Strategy Team for further insights.
