EU Stocks Continue South on Disappointing Nvidia Report and Geopolitics

Nvidia released slower than expected revenue forecast, while the Ukraine war takes a turn towards escalation.

• Nvidia revenue projections lowest in 7 quarters
• Potential slowdown in EU growth
• President Biden authorizes use of US long range missile inside Russia

Major European stock indices were lower this morning, the DAX down 0.75%, the FTSE down 0.42%, and the CAC down 0.87%.

The world’s most valuable company earnings report beat market expectations. Revenue for the last quarter was up by 94% compared to the same quarter last year, for a record $35.1 billion.

However, the forward guidance for revenue growth left considerable disappointment. The company’s growth projections are the weakest in the past 7 quarters.

The news is uncannily timely, as only yesterday ECB member de Guindos spoke of a possible AI bubble. The Wall Street Journal also pointed out that data showed that AI venture funds were experiencing their lowest returns ever.

EU Weak Growth Potential

Talk is turning to the possibility of a slowdown or contraction in growth in the Eurozone. Germany, the European powerhouse, has seen negative growth over the past 5 quarters.

China’s sluggish growth and a fall in demand for luxury goods has impacted exports from top companies in the auto and luxury brand sectors.

Stellantis and Volkswagen 2 of the most affected by a reduction in auto demand, but also Mercedes, Porsche and Audi.

Retail luxury brands are also suffering, L’Oreal is down over 30% from its highs in June, While LVMH is down over 35$ from its high in March.

Yesterday Goldman Sachs cut its 12-month target for the Stoxx600 index from 540 to 530. The investment bank cited concerns over growth and weak earnings reports from the EU area.

Potential Escalation in Ukraine

President Joe Biden authorized the use of long-range missiles inside Russia. The fact that these weapons are US made may instigate Putin to consider NATO is now at war with Russia.

Putin has stated in the past that NATO weapons used inside Russia would be considered a declaration of war. Risky assets are taking the biggest toll as stock investors are trimming exposure.

Further escalation could put even more strain on EU growth, especially if energy supply is disrupted.