The Overnight Report: Nvidia Revives AI Trade

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This story features QANTAS AIRWAYS LIMITED, and other companies.
For more info SHARE ANALYSIS: QAN
The company is included in ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

US markets faded ahead of the Nvidia results which came out after the close. Nvidia shares are trading higher after the market's close, along with earnings beats for Salesforce and CrowdStrike.

The Australian market faded on higher than expected July CPI. ASX200 futures are pointing to a flat to slightly weaker start to the day.

Good Morning,

Stickier and higher than expected July CPI weighed on the Australian market on Wednesday with the ASX200 falling -37 points or -0.4%, led lower by Technology while supermarket stocks rallied on a better-than-expected FY26 result from Woolworths Group ((WOW)).

After the close in the US, Nvidia reported what is being reported as a “blowout” second quarter. The AI chip bellwether is forecasting 70% revenue growth in 2028. 

Given the size of the company and financial metrics, that is ‘huge’. The stock is trading up over 4% in the aftermarket. 

Today is one of the busiest days of the August reporting season with earnings releases scheduled for Qantas Airways ((QAN)), Ramsay Health Care ((RHC)), NextDC ((NXT)), South32 ((S32)), Sigma Healthcare ((SIG)) and Wesfarmers ((WES)), to name but a few of the heavyweights.

RBC Capital’s second thoughts on Lovisa Holdings ((LOV)):

“An improvement in LFL’s to 3% comping a stronger prior period was the key positive from today’s result. Beyond that, we weren’t overly enthused at what was reported.

“Top-line missed, GP missed, store count missed (a lot of closures!), avg. revenue per-store is going backwards, even the total sales trading update likely missed after adjusting for FX.

“We estimate 2H could have received up to a $7.4 million tariff benefit, and if correct, then EBIT missed too. In the busyness of reporting season, some results get better/worse upon further inspection – we fear LOV’s is the latter.”

Moelis on Motorcycle Holdings ((MTO)):

“Result beat consensus expectations by +8% due to a very strong GP margin result in Mojo, offsetting the weaker retail performance. In the near term, Mojo can continue to deliver strong revenue growth and maintain margins, whilst rationalisation of the portfolio in the retail business should offset some of the weakness from the underperforming volume franchises.

“MTO have flagged investment required for its business transformation program which will keep a lid on earnings growth for now, but ultimately will lead to improved efficiency in the medium term.”

The FNArena Calendar https://fnarena.com/index.php/financial-news/calendar/

Don’t forget the FNArena corporate results monitor to track the earnings reports.

https://fnarena.com/index.php/reporting_season/

Today’s Big Picture, J.L. Bernstein extract

Meta pays to make the teen case go away

Meta settled with state attorneys general over claims its apps harmed young users.

CNBC and Yahoo put it at US$16.7 billion across 29 states, the Journal at US$18 billion across 48, so the final number is still moving.

Meta denied wrongdoing and agreed to daily time limits, overnight blocks for teens and real age checks.

Meta rose while Snap and Roblox fell, which tells you who investors think pays for this.

Inflation is stuck and the economy is fine

The Fed’s preferred gauge held at June’s pace in July, a hair above forecast and still well above the two percent target.

Spending and income both beat, so there is no soft patch to force anyone’s hand.

Ellen Zentner at Morgan Stanley Wealth Management said it was not enough to shift the balance for September.

Watch where the conversation has drifted: traders are now arguing about a hike, not a cut.

ANZ Bank, Australian Morning Focus

Equity markets were mixed following the US PCE data and reports of an agreement between Iran and Oman on revenue sharing from the Strait of Hormuz.

The US S&P500 was flat. The EuroStoxx50 and the FTSE100 ended up 0.2% and down -0.1%, respectively.

The yield on the UST 10-year bond was up 0.2bp at 4.64%. The active WTI oil future lifted 1.8% to US$82/bbl; gold was weaker at US$4,591.8/oz.

US PCE: The July deflator rose 0.2% m/m, up 3.7% y/y, with core up 0.2% m/m and 3.3% y/y. Annual measures of inflation are too high and continue to underpin a tightening bias for fed funds.

Those arguing that high y/y inflation requires higher interest rates will retain their voice. Portfolio fees contributed 46% of the rise in core PCE in July.

Market-based core PCE, which excludes imputed prices, eased to 0.15% m/m from 0.18% m/m in June. It has eased in every month since February (0.42% m/m), suggesting underlying disinflation in competitively determined core prices and an absence of inflation pass-through.

US GDP: The second revision to US Q2 GDP was unchanged at 1.5% saar. Personal consumption rose 3.4% from 3.2%. Durable goods orders were up 1.1% m/m in July (preliminary estimate). Ex-transportation rose 0.4%, while non-defence capital goods orders ex-aircraft grew 0.2%.

Australian CPI and RBA: Following the July CPI data, we now expect the RBA to hike the cash rate by 25bp to 4.60% in November. Trimmed mean inflation came in higher than expected in July, at 0.5% m/m.

The diffusion index rose sharply, with 61% of the basket up more than 3%. The data suggest strong upside risk to the RBA’s near-term inflation forecast, with 1.0% q/q trimmed mean inflation in Q3 more likely than 0.9%, albeit with a wide margin for error. The breadth and nature of the upside inflation surprise in July may also be a concern for the RBA.

A weak start to Q3: US July PCE rose 0.2% m/m in nominal terms but was flat on the month after accounting for inflation. That shows a weak start to activity for GDP in Q3. The PCE deflator was broadly in line with expectations. Headline rose 0.2% m/m versus expectations of 0.1% m/m, while core rose 0.2% m/m. Financial services and insurance rose 1.2% m/m.

We calculate that portfolio fees, which are imputed, accounted for 46% of the rise in core PCE. There is little evidence of inflation creep from oil and high semiconductor prices, but annual measures of inflation are up.

Given the Middle East conflict and the overshoot in annual inflation, we think it is natural that the market will retain its tightening bias. The Jackson Hole symposium, and Chair Warsh’s opening address in particular, will be scrutinised for any shift in near-term monetary policy bias.

CBA economics: the RBA to lose patience, Belinda Allen extract

The RBA to lose patience – rate hike now expected in November

For several months, risks have been skewed towards the need for tighter monetary policy in Australia. Debates around the neutral cash rate and the restrictiveness of policy have been front and centre.

Central to these discussions has been the inflation challenge. While inflation showed signs of moderating over the first half of the year, it has remained too high, and the RBA Monetary Policy Board has remained on edge. More recently these discussions have become more acute and signalled a low tolerance for upside surprises to inflation.

Our previous call for the RBA to remain on hold this year was based on the view that inflation would continue to ease as growth slowed. That macroeconomic backdrop remains broadly intact: growth has slowed from an above-trend pace, the housing market has deteriorated, the labour market loosened (but is still tight) and there have been some signs households have pulled back on spending.

But the path back to the RBA’s target band was always expected to be gradual and left little room for upward surprises to inflation or growth. We have been flagging for some time the need for additional tightening if inflation proved more persistent and growth more resilient. In the end it was the persistent inflation piece of the puzzle and our judgement of the RBA reaction function that has seen our call change come to fruition.

We now expect the RBA to hike the cash rate in November by 25bp, to take the cash rate to 4.60%. The risk sits with an earlier September hike.

Wednesday’s CPI data was always a risk. We had flagged that volatile items were the main reason why inflation in the June quarter was lower than expected and a bounce back was to be expected.

However, the July CPI surprise  was broader than simply a reversal of the unusually weak fuel and travel outcomes in June. While one monthly result needs to be interpreted cautiously, the renewed strength across a range of underlying and domestically influenced prices suggests the pace of disinflation has stalled and the September quarter trimmed mean CPI is more likely to come in at 0.9% or higher, above the RBA’s implied forecast of 0.8%.

Based on recent RBA communications, we expect this upside surprise to CPI will see the RBA hike the cash rate. Both the post meeting statement and Minutes contained the phrase “The Board will continue to do what it considers necessary to bring inflation sustainably back to target, including increasing the cash rate target further if upside risks materialise”.

Equity Outlook: A Constructive Case for Stocks, Andrew Simmon, Morgan Stanley Investment Management

Equity markets are forward-looking, pricing in future earnings rather than past results. Investors are now increasingly focused on 2027, where the earnings outlook remains constructive.

According to FactSet data, the consensus earnings-per-share (EPS) estimate for the S&P500 in 2027 has increased from approximately US$357 at the beginning of the year to US$406 most recently.

Those upward revisions have been regular from week to week. Since the start of 2025, Wall Street has been forced to increase its overall estimates for S&P500 earnings, as corporate results keep beating forecasts. In my view, that pattern is likely to continue until evidence suggests otherwise.

If the current 2027 EPS estimate of US$406 rises further by the end of the year, applying a reasonable price-to-earnings multiple of 20x suggests the S&P500 could still have meaningful upside for the remainder of 2026. Viewed through that lens, the market’s roughly 14% year-to-date advance appears supported by fundamentals.

What could go wrong? While the outlook is constructive, there are always plenty of risks and the path to higher valuations is unlikely to be linear.

The most significant risk, in my opinion, is Federal Reserve policy. Historically, equity markets have struggled when the Fed raises interest rates. Although a rate hike is not my base case, it would throw a wrench in my “logical” scenario.

In addition, markets also do not always respond immediately to improving fundamentals, as has been the case this year. Stock prices can take time to reflect stronger earnings. Though frustrating, that disconnect between fundamentals and share-price performance can create opportunities.

For example, the market has been narrowly focusing on risks for AI infrastructure companies, despite strong fundamentals. My view is that investors who have become less optimistic about large technology companies — the so-called hyperscalers — are making a premature mistake. Hyperscalers and large commercial banks are among the sectors that have delivered strong earnings growth and positive earnings revisions without seeing comparable stock price appreciation, a potential opportunity for investors.

A Broader Global Opportunity. Global developed-market equities outperformed U.S. equities in 2025. According to Bloomberg data, that has happened only three other times since the Global Financial Crisis—2012, 2017 and 2022—and international markets could continue to perform well this year.

That said, I am not advocating for a wholesale shift away from U.S. equities. Instead, a diversified allocation that includes U.S., European and Asian stocks may outperform a portfolio invested solely in the U.S. market.

The reason again is earnings revisions. As equity managers, we are seeing certain opportunities outside the U.S., such as European bank stocks, where stock prices have been lagging EPS growth, resulting in lower P/Es and potentially a good point of entry.

Bottom Line: The current equity rally appears broadly supported by improving earnings expectations rather than speculative enthusiasm alone. While risks—including potential Fed policy changes—remain, the combination of rising earnings estimates, attractive opportunities among underappreciated sectors and a more balanced global allocation supports a constructive outlook for equities through the end of 2026.

For investors, the implication is not to abandon U.S. equities, but to broaden exposure toward companies and regions where earnings momentum may not yet be fully reflected in valuations.

Corporate news in Australia:

• Chris Hemsworth has acquired a stake in Australian whisky maker Archie Rose Distilling ahead of the company’s planned expansion into the US
• Sumitomo-led consortium has offered $813.1m for FleetPartners ((FPR)), escalating the bidding contest for the fleet management group
• Quadrant-backed Herron Todd White has acquired quantity surveying and construction advisory firm Mitchell Brandtman, with QIC and Metrics providing debt funding
• Genetic Signatures ((GSS)) and Microba Life Sciences ((MAP)) have entered preliminary merger discussions
• Ingenia Communities Group ((INA)) has agreed to acquire 100% of Peet ((PPC)) via a cash-and-scrip scheme, alongside establishing a $615m Flagstone City JV
• Frasers Group has intensified pressure on takeover target Accent Group ((AX1)), calling for chairman Lawrence Myers to resign following the company’s FY26 results 
• Warburg Pincus has joined the $1bn-plus auction for Apax-owned auction and asset remarketing business Pickles
• IFM Investors and Global Infrastructure Partners have teamed up to bid for Blue Owl’s circa $30bn STACK Asia-Pacific data centre portfolio, competing against Macquarie, Brookfield and other infrastructure investors
• Kelsian Group ((KLS)) has abandoned the $15.2m sale of SeaLink Rottnest to Journey Beyond but continues to progress the $145.8m divestment of the remainder of its tourism portfolio
• Edge Early Learning has entered voluntary administration following rent defaults to landlord Arena REIT ((ARF))
• HMC Capital ((HMC)) has lined up a $5bn investment war chest targeting private credit, property and digital infrastructure
• Tribeca Investment Partners is testing investor appetite for a proposed $250m ASX-listed credit fund

On the calendar today:

-AU 2Q Private capex

-AU July Household spending

-CH July Ind Profits

-EZ July M3

-US Aug Kansas Fed mfg

-US July Trade Bal

-US July Wholesale inventories (prelim)

-CA 2Q Current A/C

-CA 2Q Current A/C

-CA 2Q Current account

-ARN MEDIA LIMITED ((A1N)) FY26 earnings report

-ATLAS ARTERIA ((ALX)) FY26 earnings report

-AMOTIV LIMITED ((AOV)) FY26 earnings report

-APPEN LIMITED ((APX)) FY26 earnings report

-AUSTRALIAN UNITED INVESTMENT CO. LIMITED ((AUI)) ex-div 20.00c (100%)

-AUSTRALIAN UNITED INVESTMENT CO. LIMITED ((AUI)) ex-div 8.00c (100%)

-BAPCOR LIMITED ((BAP)) FY26 earnings report

-BELLEVUE GOLD LIMITED ((BGL)) FY26 earnings report

-BEACON LIGHTING GROUP LIMITED ((BLX)) FY26 earnings report

-BOSS ENERGY LIMITED ((BOE)) FY26 earnings report

-BUBS AUSTRALIA LIMITED ((BUB)) FY26 earnings report

-CUSCAL LIMITED ((CCL)) ex-div 7.00c (100%)

-CROMWELL PROPERTY GROUP ((CMW)) FY26 earnings report

-CENTURIA CAPITAL GROUP ((CNI)) FY26 earnings report

-CLARITY PHARMACEUTICALS LIMITED ((CU6)) FY26 earnings report

-CARNARVON ENERGY LIMITED ((CVN)) FY26 earnings report

-EBOS GROUP LIMITED ((EBO)) ex-div 44.81c (97%)

-GENESIS ENERGY LIMITED ((GNE)) FY26 earnings report

-HEARTLAND GROUP HOLDINGS LIMITED ((HGH)) ex-div 2.91c

-IGNITE LIMITED ((IGN)) ex-div 3.00c (100%)

-IGO LIMITED ((IGO)) FY26 earnings report

-IMPEDIMED LIMITED ((IPD)) FY26 earnings report

-IPH LIMITED ((IPH)) ex-div 19.50c (30%)

-JB HI-FI LIMITED ((JBH)) ex-div 127.00c (100%)

-JUMBO INTERACTIVE LIMITED ((JIN)) FY26 earnings report

-KAROON ENERGY LIMITED ((KAR)) H12026 earnings report

-MACQUARIE TECHNOLOGY GROUP LIMITED ((MAQ)) FY26 earnings report

-MAGELLAN FINANCIAL GROUP LIMITED ((MFG)) FY26 earnings report

-MINERAL RESOURCES LIMITED ((MIN)) FY26 earnings report

-MLG OZ LIMITED ((MLG)) ex-div 1.30c (100%)

-NEUREN PHARMACEUTICALS LIMITED ((NEU)) FY26 earnings report

-NEXTDC LIMITED ((NXT)) FY26 earnings report

-PACIFIC CURRENT GROUP LIMITED ((PAC)) FY26 earnings report

-PERPETUAL LIMITED ((PPT)) FY26 earnings report

-PYC THERAPEUTICS LIMITED ((PYC)) FY26 earnings report

-QANTAS AIRWAYS LIMITED ((QAN)) FY26 earnings report

-REA GROUP LIMITED ((REA)) ex-div 173.00c (100%)

-RAMSAY HEALTH CARE LIMITED ((RHC)) FY26 earnings report

-SOUTH32 LIMITED ((S32)) FY26 earnings report

-STAR ENTERTAINMENT GROUP LIMITED ((SGR)) FY26 earnings report

-SIGMA HEALTHCARE LIMITED ((SIG)) FY26 earnings report

-SMARTGROUP CORPORATION LIMITED ((SIQ)) 1H26 earnings report

-SILEX SYSTEMS LIMITED ((SLX)) FY26 earnings report

-SRG GLOBAL LIMITED ((SRG)) ex-div 4.00c (100%)

-SRG GLOBAL LIMITED ((SRG)) ex-div 4c (100%)

-TPG TELECOM LIMITED ((TPG)) ex-div 10.00c (25%)

-TRUSCREEN GROUP LIMITED ((TRU)) FY26 earnings report

-VENTIA SERVICES GROUP LIMITED ((VNT)) ex-div 11.76c (100%)

-WEB TRAVEL GROUP LIMITED ((WEB)) AGM

-WESFARMERS LIMITED ((WES)) FY26 earnings report

-XERO LIMITED ((XRO)) AGM

FNArena’s four-weekly calendar: https://fnarena.com/index.php/financial-news/calendar/

The Australian share market over the past thirty days…

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