Background: Nvidia is the US chipmaker whose GPUs power almost every major AI model globally. Three years ago it was worth $400 billion USD and recently it became the first company to hit a $5 trillion USD valuation. Markets have been nervous lately with fears that AI stocks, especially Nvidia, might not meet the sky-high expectations investors have set.

What happened: Now, Nvidia has beaten investor expectations again with quarterly revenue of $57 billion USD, up 62% year on year. It also forecast $65 billion USD for next quarter. Interestingly, 61% of Nvidia’s revenue comes from four major customers, widely assumed to be Microsoft, Amazon, Meta and OpenAI.

What else: Nvidia’s size now means its performance affects entire markets. Its results can move indices both up and down.

What's the key learning?

💡When one giant becomes so dominant its results can move entire indices and the upside is huge but the downside can be just as large.

💡Nvidia is now so big that markets rely on it to keep delivering extreme growth. Its share gains have made up 18% of the S&P 500’s total return this year, and even the Australian tech sector jumped 5.1% after its latest results.

💡But this Nvidia rally was short-lived because even after these whopping results, the S&P500 closed down 1.6% and $3 trillion in market value was wiped in 6 hours.