CNBC Daily Open: It’s not completely bad news that Nvidia fell

This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

Markets try to shrug off Nvidia
U.S. markets were mixed Thursday. The Dow Jones Industrial Average hit a new closing high, but the other two major indexes didn’t fare as well. Asia-Pacific markets bucked the trend, climbing Friday. Hong Kong’s Hang Seng index was the top performer, rising 1.8%. Separately, Tokyo’s August inflation rose to 2.6%, the highest since March.

Outsized expectations
Nvidia shares lost around 6% Thursday despite the chipmaker posting quarterly revenue that was more than two times the figure a year earlier and the company announcing a $50 billion stock buyback, which usually pushes up share prices. That shows just how high investors’ expectations for Nvidia were.

Intel’s no longer inside
Intel, once the dominant semiconductor company, has been struggling in the wake of Nvidia’s artificial intelligence-driven surge – its stock is down almost 60% this year. No surprise, then, that Intel executives are working with advisors from Morgan Stanley and other banks to come up with a turnaround strategy for the company.

Price vs. spending
July’s consumer price index may have been a pleasant surprise, coming in at 2.9% for the year – lower than forecast and the slowest pace since March 2021. But the U.S. Federal Reserve pays more attention to the personal consumption expenditures price index, which comes out Friday. Here’s what to expect.

[PRO] Utilities as an AI play
For investors who want to buy into the AI boom but missed the initial spike, utilities are a natural second option. AI data centers suck up huge amounts of energy, which means energy companies will benefit too. Unfortunately, it seems too late to buy utilities too, according to Morningstar – except for two stocks.

It’s the tragedy of the overachieving child: You’re expected not just to ace every examination, but also excel in extracurricular activities.

So, when you’re just like every other academic genius with perfect grades, that’s merely the baseline you should be hitting.

Such is the plight of Nvidia. Despite posting ridiculous revenue growth numbers that would send any other company’s stock straight into the stratosphere, Nvidia’s shares fell about 6% yesterday.

The culprit: For the company’s fiscal second quarter, revenue rose “only” 122% on an annual basis, compared with three quarters of more than 200% year-over-year growth. The chipmaker’s expected gross margins for the full year were also slightly lower than anticipated.

As Ryan Detrick, chief market strategist at Carson Group, wrote, “Death, taxes, and NVDA beats on earnings are three things you can bank on.” In other words, just beating earnings estimates isn’t enough for Nvidia anymore. It’s more about “the size of the beat.”

To be fair, other companies face the same issue too, though perhaps not on the same magnitude as Nvidia.

“When you have 75% or 80% of companies beating their estimates on any given quarter, that tells you it’s not such a special thing anymore,” said Interactive Brokers chief strategist Steve Sosnick. “Beating estimates is no longer a sufficient condition for a post-earnings rally.”

In any case, Nvidia’s loss yesterday may be good for the broader market. Hear me out. Yes, the S&P 500 was mostly unchanged, while the Nasdaq Composite slipped 0.23%. But the Dow Jones Industrial Average, buoyed by gains in technology stocks like Apple and Microsoft, added 0.59% for a new record close.

That suggests the tech sector and, indeed, the broader market is relying less on Nvidia for gains. The family, finally, isn’t pinning all its hope on one child.

— CNBC’s Arjun Kharpal, Kif Leswing, Fred Imbert and Lisa Kailai Han contributed to this report.