After AI chip giant NVIDIA delivered quarterly results that far exceeded expectations, overnight U.S. stocks celebrated again. The Nasdaq surged 1.2% to a record closing high, while the Philadelphia Semiconductor Index jumped 2.5%, lifting the entire tech sector. Funds clearly moved out of defensive sectors into AI-related heavyweights. Chinese stocks were led by live-streaming e-commerce names, contrasting with volatility in new-energy vehicle stocks. This article reviews the overnight U.S. market session and interprets the profound impact of NVIDIA's earnings.
NVIDIA Earnings Crush Expectations, AI Computing Demand Continues to Surge
NVIDIA reported fiscal Q2 2026 results after the U.S. market close, with revenue of $38 billion, up 52% year-over-year, well above the market's expected $35 billion. Adjusted EPS of $2.85 also far surpassed analysts' estimate of $2.50. The data center business remained the biggest growth engine, with revenue of $32 billion, up 65% year-over-year, driven by strong purchases of AI training and inference chips by cloud service providers and enterprise customers.
Even more exciting for the market, NVIDIA announced that its next-generation Blackwell Ultra architecture GPUs have entered mass production and secured massive orders from major cloud providers, with shipments expected to hit new highs in the second half of the year. Management raised its full-year revenue outlook to $150 billion, well above the previous range of $138 billion to $142 billion. The news immediately ignited optimism across the AI supply chain, with shares jumping as much as 7% after hours, breaking above the $800 level.
Three Major U.S. Indices Mixed, Nasdaq and S&P Hit New Highs
Boosted by NVIDIA's earnings, tech stocks led gains. However, while the Nasdaq and S&P 500 both closed at record highs, the Dow Jones Industrial Average edged lower as traditional sectors softened. Here are the details:
- Nasdaq rose 210 points (+1.2%) to 18,450, a record high for the third consecutive trading day.
- S&P 500 rose 0.8% to 5,680, with information technology surging 2.1% and communication services up 1.3%.
- Dow Jones Industrial Average fell 45 points (-0.1%) to 40,520, dragged down by traditional heavyweights such as UnitedHealth and Goldman Sachs.
Looking at fund flows, defensive sectors such as utilities and consumer staples fell 0.8% and 0.5%, respectively, indicating a clear rise in risk appetite as funds moved out of defensive sectors and into growth tech stocks.
Semiconductor Sector Erupts, AI Supply Chain Benefits Broadly
NVIDIA's stellar results not only lifted its own shares but also boosted the entire semiconductor supply chain. Chipmaking giant TSMC (TSM) ADR rose 3.2%, and packaging and testing leader ASE (ASX) gained 2.8%. Memory maker Micron (MU) also advanced 4.1%, as demand for high-bandwidth memory (HBM) from AI servers exploded. Meanwhile, rival AMD, though yet to report earnings, rose 2.7% with the market, as investors expect its upcoming MI400-series GPUs to capture some orders.
Notably, the Philadelphia Semiconductor Index jumped 2.5% overnight, far exceeding other sectors. Analysts noted that the AI boom has spread from pure GPU suppliers to the entire supply chain, including optical communication modules, thermal components, and power management ICs, with related stocks broadly benefiting. The rotation direction is clear: sell defensive stocks, buy AI semiconductors.
Chinese Stocks: Live-Streaming E-Commerce Leads, New Energy Vehicles Wobble
Chinese stocks were mixed overnight, but the live-streaming e-commerce group stood out. PDD Holdings (PDD) surged 6.5%, driven by reports that its overseas version Temu continues to gain penetration in Europe and the U.S., with Q2 GMV likely to grow over 80% year-over-year. Kuaishou (KuaiShou) also rose 4.2% on strong short-video e-commerce business growth. Meanwhile, new-energy vehicle stocks were mixed: NIO (NIO) edged up 1.2%, XPeng (XPEV) fell 2.1%, and Li Auto (LI) was flat, reflecting lingering concerns over the price war.
Looking at overnight fund flows, foreign investors' interest in Chinese stocks seems to be recovering, especially for platform companies with consumer attributes. This differs from the earlier concentration in emerging tech sectors, indicating investors are starting to look for value opportunities beyond AI.
Market Views and Outlook: Beware of Overheated Valuation Risks
Despite high market sentiment, some analysts are beginning to warn of valuation risks. The Nasdaq's P/E ratio has reached 38x, well above its five-year average of 28x, and NVIDIA's forward P/E also exceeds 35x. LPL Financial's chief strategist noted: 'AI fundamentals are indeed strong, but the market has fully priced in two years of earnings growth. Any quarter that misses expectations could trigger a sharp pullback.'
Meanwhile, U.S. Treasury yield movements will also affect tech stocks. The 10-year Treasury yield edged down to 3.95% overnight, providing support for bulls. If Fed officials deliver hawkish remarks next week, a yield rebound could pressure high-valuation tech stocks. Fund flow data shows net inflows into tech for three consecutive days, but retail sentiment is near this year's highs, so chasing highs in the short term calls for caution.
Looking ahead to today's Asia-Pacific markets, Nikkei and Hang Seng Tech Index futures are expected to open higher, and overnight Chinese stock performance may drive a rebound in Hong Kong tech stocks. The next focus will shift to earnings from tech giants like Apple and Amazon; if they also deliver strong results, the AI bull market rally may continue.
In summary, NVIDIA's earnings once again prove that AI is the most important bull engine for U.S. stocks, but the market is beginning to diverge on gains and valuations. With rapid rotation, investors should remain rational and closely watch whether earnings can continue to deliver.
