There were always going to be two big forces having an impact on markets this week -- chip maker Nvidia's earnings and PCE, the Fed's preferred inflation measure.

But it was a third, unscheduled, force that unsettled traders Wednesday -- fresh comments from President Donald Trump about imposing tariffs on imports from Europe. The market shuddered when they hit, suggesting traders aren't ignoring the threat that the taxes could fan inflation and hurt growth. But stocks also didn't dive, which hints that, given Trump's record so far, few people expect the impact of the levies to be that severe.

Earnings from Nvidia had been well trailed. It has been the biggest beneficiary of the hype around artificial intelligence and beat Wall Street analysts' expectations. Again. But traders were nonplused in the aftermarket -- they are used to being blown away by the company. On the plus side, the results were certainly good enough to show that AI is alive and kicking.

Both Trump and AI are clearly important in trying to decide whether stocks are close to a peak as the bull market rides into its third year. AI is still capable of boosting company earnings, particularly for those on the supply side of the technology such as Nvidia. Companies that are banking on AI enhancing their productivity still have something to prove, especially as China's DeepSeek raises the question of how much it should cost.

The other juggernaut that determines where the market goes from here will be the economy. Consumer confidence data this week looked bad, but there's little in the hard data so far to suggest much of a slowdown and surveys can be misleading. The S&P 500 still managed to eke out a gain on Wednesday, snapping a four-day losing streak. Friday's personal consumption expenditures data are the next important indicator.

Hopefully that's a sign the market isn't too fragile.

-- Brian Swin t

***

Chip Maker Beats Expectations as CEO's Optimism Grows

Artificial intelligence chip leader Nvidia demonstrated that chip spending continues to skyrocket despite concerns about how long the industry's AI boom can last. Quarterly revenue jumped 78% and profit per-share rose 80%, while CEO Jensen Huang is even more optimistic about its top-end Blackwell chip.

   -- For the January quarter, Nvidia reported adjusted earnings of 89 cents a 
      share and revenue of $39.3 billion, both ahead of expectations. For the 
      current quarter, Nvidia provided a revenue forecast range with a midpoint 
      of $43.0 billion. That's higher than the consensus of $42.1 billion. 
 
   -- Data center revenue was $35.6 billion for the January quarter, up 93% 
      from a year earlier. Large cloud computing providers accounted for about 
      50% of its data center revenue in the quarter. Blackwell GPU architecture 
      generated $11 billion in revenue, and it said it was the "fastest product 
      ramp in our company's history." 
 
   -- Huang noted a shift in AI toward reasoning models that need more 
      computing power as they come up with answers, inspired somewhat by the 
      Chinese developer DeepSeek, which he said "ignited global enthusiasm." 
      Reasoning models need one hundred times more computing resources, he 
      said. 
 
   -- Profit margins are narrowing because making its newest data center 
      equipment costs more, and Nvidia is also spending more. Quarterly 
      operating expenses rose 48%, and CFO Colette Kress said that was largely 
      because of bigger pay packages for its growing workforce. 

What's Next: One big uncertainty facing Nvidia is whether the Trump administration will follow through on policies from the Biden administration that would clamp down on exports of sensitive AI technology to China and other places.

-- Tae Kim and Liz Moyer

***

Eli Lilly Doubling Down on U.S. Factories Amid Tariff Threat

Amid tariff threats aimed at bringing manufacturing back home, Eli Lilly is more than doubling its spending on U.S. facilities, scouting sites for four new factories that should be operational within five years. CEO David Ricks urged Washington to extend the 2017 tax cuts that have spurred spending.

   -- Lilly is spending $27 billion on the sites, bringing its total investment 
      since 2020 to $50 billion. Ricks said the new sites will create thousands 
      of jobs and shore up the supply chain, saying it reflects Lilly's 
      commitment to staying ahead of anticipated drug demand. 
 
   -- Three of the new sites will produce active pharmaceutical ingredients for 
      its drug supply chain, and the fourth will produce sterile injectable 
      medicines such as its diabetes drug Mounjaro. Lilly on Tuesday slashed 
      prices for lower-dose versions of its weight-loss drug Zepbound. 
 
   -- Ricks told The Wall Street Journal that Lilly hadn't built a U.S. 
      facility in more than 40 years, until the first Trump administration's 
      tax cuts. "We need to see those either extended or improved to support 
      this." 
 
   -- The announcement also comes days after Ricks and other pharmaceutical 
      chiefs met with President Donald Trump to discuss issues including 
      Trump's threat to put 25% tariffs on pharmaceutical imports. Domestic 
      manufacturing could help producers avoid tariffs, Trump has said. 

What's Next: Analysts don't expect the threatened tariffs to have much of a financial impact because of the high margins on medicines, the Journal reported. Lilly expects to announce the locations of the four sites this year.

-- Janet H. Cho

***

Tesla Stock's Tumble Has Hit Musk's Wealth Hard

Tesla stock's epic fall has wiped out more than $600 billion market value since mid-December highs and the decline has cost CEO Elon Musk some $140 billion in net worth.

   -- He's still worth some $420 billion, according to Barron's math. Investors 
      might want to pay attention to the changing distribution of his wealth, 
      though. Musk's stakes in rocket maker SpaceX, artificial intelligence 
      company xAI, and social-media platform X now look to be worth a little 
      more than his stake in the electric vehicle maker. 
 
   -- That's after Tesla stock fell roughly 20% over the past five days leading 
      into Thursday trading. In the past, Tesla stock typically represented the 
      lion's share of Musk's wealth. 
 
   -- There is no one true number for Musk's net worth. Based on recent data, 
      Musk's stakes in SpaceX, xAI, and X are worth up to $220 billion 
      combined. The value of Musk's Tesla stock is down to about $200 billion. 

What's Next: What, if anything, the changing distribution means for investors is hard to say. Investors, in the past, have been comforted by the fact that most of Musk's wealth derived from his car company. Now, Musk has more of a cushion. If he loses money on Tesla, he has several other companies providing ballast for his bank balance.

-- Al Root

***

Salesforce Is Enthusiastic About AI Agents, But It's Early Days

Salesforce's first quarter and fiscal year sales outlooks fell short of expectations, casting a shadow over the enthusiasm for its artificial intelligence product. While it introduced its Agentforce AI agents with fanfare last year, it now says the product is likely to make only a modest contribution to sales this year.

   -- Salesforce, which makes customer relationship management software, 
      expects current fiscal year revenue of $40.5 billion to $40.9 billion, 
      nearly $1 billion below consensus. First quarter revenue is projected to 
      be a range of $9.71 billion to $9.76 billion. 
 
   -- Salesforce sees the new AI "agents" as transforming how businesses handle 
      customer service questions or handle mortgages and insurance. But CFO Amy 
      Weaver said the customer adoption cycle was still early and a more 
      meaningful contribution could come in 2027. 
 
   -- CEO Marc Benioff said Agentforce has 3,000 paying customers. For the 
      fourth quarter, Salesforce reported just under $10 billion in sales, up 
      from $9.29 billion in the same quarter a year earlier, and adjusted 
      earnings of $2.78 a share, beating expectations. 
 
   -- Some analysts have questioned the extent to which the AI agents would 
      compete with or replace human workers. Benioff sees them coexisting, 
      telling analysts AI agents can push productivity higher. He said CEOs of 
      the future were going to be managing humans and agents together. 

What's Next: Salesforce's cautious outlook may be related to a change in its executive ranks. CFO Weaver is leaving, and Robin Washington is coming in as President and Chief Operating and Financial Officer in March, a newly created role.

-- Liz Moyer

***

BP Pivoting Back to Oil, Away From Clean Energy

Struggling U.K. oil major BP has announced what it called a "fundamental reset," saying it will increase oil and gas production, improve its cash flow, and invest less in low-carbon projects. It also plans to shed $20 billion of assets by 2027 to reduce its debt.

   -- BP lags far behind U.S. rivals Exxon Mobil and Chevron in investor 
      returns. The announced shift was an attempt to win over investors, 
      including the activist fund Elliott Management, which has built a stake 
      as it presses for changes. "It's a radical shift," BP CEO Murray 
      Auchincloss said. 
 
   -- BP wants to pump more oil in the U.S. and in Oman, the United Arab 
      Emirates, and Iraq. Since becoming CEO in 2023, Auchincloss has scaled 
      down BP's hydrogen and biofuel plans, put its U.S. onshore-wind business 
      up for sale, boosted investments in oil and gas, and initiated a 
      cost-cutting drive. 
 
   -- BP pivoted to lower carbon energy in 2020, but that was just as fossil 
      fuel consumption and oil prices were poised to surge, especially from 
      Russia's invasion of Ukraine. Now, BP will cut more than $5 billion 
      annually in lower-carbon energy investments. 
 

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February 27, 2025 07:02 ET (12:02 GMT)

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