Why Nvidia stock is surging 2% today, bucking the market trend

Nvidia stock rose around 2% to $180.31 in early trading, rebounding even as broader equity markets remained under pressure.

The stock had fallen 7.5% over the previous five trading sessions through Friday’s close.

Investors were underwhelmed by the company’s latest earnings report and its $30 billion investment in OpenAI, both announced in the past week.

Monday’s rebound came despite lingering geopolitical tensions.

US equities tumbled after the United States and Israel launched coordinated strikes on Iran over the weekend.

The Dow Jones Industrial Average fell 543 points, or 1.1%, while the S&P 500 dropped 1.1% and Nasdaq Composite futures declined 1.6%.

At the time of writing, major indices had recovered somewhat and were trading about 0.3% lower.

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Caution reflects broader AI concerns

Analysts at UBS said the sceptical market reaction to Nvidia’s earnings — which beat forecasts — underscored rising investor caution around artificial intelligence.

The stock’s 5.5% decline in the session following the earnings release marked its sharpest post-earnings drop in a year.

UBS noted that hyperscalers are on track to divert nearly 100% of their free cash flow toward capital expenditures this year, compared with a 10-year average of around 40%.

That shift has fueled concerns that AI-related spending may be growing too quickly and could pose risks to the broader bull market.

The firm added that the increasing use of leverage — both public and private — to finance AI infrastructure expansion could amplify market volatility.

While UBS suggested some of these fears may be overstated, it acknowledged that uncertainty has made investors less willing to pay historically elevated multiples for technology stocks.

Despite near-term volatility, UBS maintained a positive view on equities overall, citing resilient economic growth, supportive fiscal and monetary policy, and robust earnings growth.

The firm said the upcoming February jobs data would provide further evidence of economic resilience.

Morgan Stanley on Nvidia stock

Morgan Stanley also reiterated a constructive stance, naming Nvidia a top pick and pointing to what it sees as an attractive entry point.

“For the last two quarters, NVIDIA has not moved while business has continued to strengthen — a function of concerns about the durability of current growth,” the firm said.

“Those concerns should turn to 2027 enthusiasm in the coming months. We see the stock at 18x CY27 EPS as a surprisingly good entry point.”

The bank added that frontier AI model developers continue to demand more computing power than supply can currently meet, with semiconductor constraints and global supply chain commitments indicating sustained infrastructure investment.

It said it does not anticipate a peak in 2026 and sees growth expectations for 2027 increasing.

Expanding investment in photonics

Separately, Nvidia announced a combined $4 billion investment in two US-based photonics companies as it seeks to strengthen research pipelines and supply chains supporting AI infrastructure.

The chipmaker is investing $2 billion each in Lumentum and Coherent.

Both companies develop optical and photonic technologies used in sensing, data transmission, and high-performance computing applications.

Lumentum focuses on optical systems powering AI, cloud computing, and next-generation communications networks, while Coherent specialises in photonics systems that harness light for advanced optical applications.