Nvidia to Set Stock Market Course as Investors Await Earnings

Nvidia's (NVDA.O) earnings report next week could be a key driver of U.S. stock market performance. Investors are watching closely to see if the AI-fueled rally can continue after a recent sell-off sparked by a surprise move by Chinese startup DeepSeek.

AI Leader Under Fire

Nvidia, the dominant force in the AI industry, is the world's second-largest company by market value, accounting for 6.3% of the S&P 500 (.SPX), according to LSEG. The graphics processor maker's stock has risen more than 550% in two years, making it one of the stock market's biggest drivers.

But that rapid growth slowed sharply in late January when DeepSeek launched an affordable alternative AI model, raising concerns about competition from U.S. tech giants. The market's reaction was swift: Nvidia shares lost 17% on January 27, equivalent to $593 billion, the largest one-day drop in the company's history.

Big numbers coming

Nvidia is currently worth about $3.4 trillion. The company's upcoming financial report, scheduled for February 26, is expected to show quarterly revenue of $20.89 billion, up 72% year-over-year, according to LSEG.

Investors will be focused not only on the current financial results, but also on Nvidia's management outlook. The company must confirm stable demand for its chips and convince the market that its dominance in the AI sector is sustainable. This report could be a key indicator of the future direction of Nvidia's stock and the entire tech sector.

Economic signals and Nvidia: what will influence the market?

Next week, investors will be closely watching not only Nvidia's report, but also the US inflation data for January. This is especially true after the unexpected December price jump, which was the largest in the last eight months. The main factor behind the rise in inflation was an increase in consumer spending on goods and services.

The Fed may be slow to cut rates

If the data beats expectations again, it could force the Federal Reserve to stick to a tighter monetary policy and delay interest rate cuts longer. Such a scenario would put pressure on the stock market, especially on tech stocks, which are sensitive to rate changes.

European markets react with gains

Amid political stability in Germany, European stock indexes started the week with gains. The elections brought a predictable result, which strengthened investor confidence.

German DAX futures jumped 1.1%, and the single European currency rose 0.5%, reaching $1.0516 and approaching the January high of $1.0535. The EUROSTOXX 50 gained 0.4%, and the FTSE - 0.1%.

Investors are also counting on Nvidia's report to live up to high expectations, supporting confidence in the tech sector. The company's success could trigger a new round of growth on Wall Street.

Political uncertainty in Germany and challenges for the EU

Although the new leader of the conservatives, Friedrich Merz, has won, he faces a difficult process of forming a coalition government. The question is whether it will be possible to create a stable ruling coalition with one or two partners - the second option will require lengthy negotiations.

In the meantime, the European Union is preparing for an extraordinary summit on March 6. The main topics of the meeting are additional support for Ukraine and issues of financing Europe's defense needs. These decisions may affect the euro exchange rate and the dynamics of European markets.

Against this backdrop, the coming week promises to be tense and rich in important economic and political events.

Asian Stocks Under Pressure, Hong Kong Continues to Gain

Asian stock markets started the week mixed amid tight liquidity due to holidays in Japan. MSCI, the index that tracks Asia-Pacific shares outside Japan, slipped 0.5%. Nikkei futures fell to 38,310, below Friday's close of 38,776.

China Market Seeks Support

While the CSI 300 index of China's largest companies slipped 0.1%, Hong Kong (.HSI) continued to gain, adding 0.2%. The gains were driven by the strong tech sector, which remains a key driver of price action.

Barclays analysts say Chinese authorities are showing a shift in their rhetoric toward tech giants and the private sector. The shift could signal a willingness on the part of regulators to support the market while reducing the risk of over-regulation.

"If this trend continues, we could see investment activity in China pick up and pressure on the yuan ease," Barclays said in a note. At the same time, such changes could adjust the outlook for the dollar and emerging markets in general.

US indices try to recover

Futures on the S&P 500 and Nasdaq indices gained 0.5%, indicating that the market is trying to recover from last week's significant losses. The Nasdaq recorded its biggest weekly decline in three months, losing 2.5%, with the so-called "Magnificent Seven" stocks – leading tech giants – feeling the brunt of the pressure.

Wall Street under pressure and trade tensions

US stocks came under pressure after an unexpected decline in business activity in the services sector. The publication of the relevant index caused anxiety among investors, increasing fears about a potential economic slowdown.

Adding to the tensions are reports that the US administration is pressuring Mexico to impose its own tariffs on Chinese goods, a move seen as part of Washington's strategy to limit China's influence on global trade.

The Fed is preparing signals for the market

At least nine Federal Reserve officials are scheduled to speak publicly this week, some of them multiple times. Investors will be watching their comments closely, especially on their future monetary policy.

The Fed's rhetoric is expected to remain cautious, with officials likely to confirm their intention to wait for clearer signs of inflation slowing before moving to cut interest rates. This could impact investor sentiment and market dynamics in the coming days.

FX Markets: Dollar Under Pressure

The US dollar continues to show weakness after a sharp decline last week. The rate against the Japanese yen settled at 149.26, down 2% for the week. If the downtrend continues, key support at 148.65 could be tested.

The overall dollar index fell 0.3% to 106.210. The weakening US currency weighed on the euro, pound sterling and Swiss franc, which all rose.

Gold holds its ground confidently

In commodity markets, gold remains one of the main beneficiaries of the dollar's weakness. The price of the precious metal settled at $2,942 per ounce, showing growth for the eighth week in a row. Demand for gold is supported by market uncertainty and expectations of lower interest rates in the future.

Oil prices continue to decline

The oil market is under pressure. Expectations of a possible diplomatic settlement of the conflict in Ukraine have increased speculation about a possible easing of sanctions against Russia. This could lead to an increase in the supply of Russian oil to the world market, which puts pressure on prices.

Brent crude futures fell 10 cents to settle at $74.33 a barrel. U.S. crude lost 20 cents to settle at $70.20 a barrel. Prices hit a two-month low during the session.

Berkshire Hathaway Sets New Records

Warren Buffett's Berkshire Hathaway (BRKa.N) holding company has once again demonstrated outstanding financial results. According to the results of the fourth quarter, the company's operating profit increased by 71%, reaching $ 14.53 billion.

During the whole of 2024, operating profit increased by 27%, amounting to $ 47.44 billion. One of the main drivers of this growth was the increase in income from the company's insurance business, in particular, improved underwriting indicators and growth in investment income.

A key factor in Berkshire's financial success also remains the huge amount of cash, which at the end of 2024 reached a record $ 334.2 billion - double that of the previous year.

Net profit jumped thanks to investments

Berkshire's total quarterly net profit amounted to $ 19.69 billion, which is equivalent to $ 13,695 per average share of the company. A significant contribution to this growth was made by the increase in the value of assets in such giants as Apple (AAPL.O), American Express (AXP.N) and other large corporations.

For the year, the company's net profit reached an impressive $ 89 billion, cementing Berkshire Hathaway's status as one of the most successful investment structures in the world.

Buffett warns: net profit can be misleading

Berkshire Hathaway CEO Warren Buffett traditionally urges investors not to get hung up on the company's net profit, since this figure includes unfinished investment operations. In fact, financial statements can reflect paper gains or losses from assets that the company does not plan to sell in the near future.

Buffett's approach explains why Berkshire continues to maintain a conservative investment strategy, focusing on long-term growth rather than short-term fluctuations in the market value of assets.

Asset sales and record cash reserves

Berkshire's significant increase in cash in 2024 was the result of massive stock sales that have netted the company $143.4 billion. Among the most notable moves were a 62% reduction in its stake in Apple and the sale of a third of its Bank of America (BAC.N) stake.

At the same time, Berkshire has been a net seller of shares for nine consecutive quarters, which indicates Buffett's continued caution regarding the stock market.

Share buybacks: minimal spending

Despite the increase in liquidity, the company's share repurchases last year were extremely modest. In 2024, the company spent only $2.9 billion on repurchases, and since May last year, it has suspended the practice altogether.

This approach may indicate that Buffett does not consider his company's shares undervalued and also expects more profitable investment opportunities to emerge.

Energy Business Delivers Record Profits

One of the key drivers of Berkshire's profit growth last year was the energy sector. Berkshire Hathaway Energy's net income more than doubled, helped by higher margins in its utilities business.

Additionally, the company benefited from lower costs related to PacifiCorp's litigation over the 2020 Oregon and California wildfires.

Buffett also disclosed that Berkshire has paid $3.9 billion at the end of 2024 to buy back an 8% stake in Berkshire Hathaway Energy that was previously in other hands.

Diversity of Assets: From Industrials to Consumer Brands

Berkshire Hathaway remains a diversified giant, owning stakes in some of the largest American companies and actively developing its own business lines.

In addition to industrial assets, Berkshire's portfolio includes well-known consumer brands, including Dairy Queen, Fruit of the Loom, and See's Candies. These mass-market companies provide stable earnings and help maintain a balance between investment activity and operating profits.

Based on Buffett's strategy, Berkshire will maintain a cautious approach to the stock market in the coming years, focusing on strengthening its own businesses and finding new investment opportunities.