The Overnight Report: Software Boosts Tech Rally

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This story features BHP GROUP LIMITED, and other companies.
For more info SHARE ANALYSIS: BHP
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

US markets rallied, led by a narrow concentration of aggressive buying across software and cybersecurity stocks.

Buyers bought Nvidia as the AI trade shows no signs of slowing down, it's just changing shape.

The Australian market fell for a second day as investors priced in a higher probability of a rate rise at either the September or November RBA meetings.

ASX200 futures are pointing to a positive start. Let's see!

Good Morning,

The Australian market took a tumble on Thursday, down -89.6 points or -0.98% to 9038.20, with selling gaining momentum over the course of the day as fears grew of another rise in interest rates.

Post Wednesday’s July CPI print and yesterday’s stronger-than-expected household spending in July, up 1.1%, the market is now pricing in a higher probability of a rate rise at either the September or November RBA meetings.

The biggest drains on the index were BHP Group ((BHP)), Wesfarmers ((WES)), ANZ Bank ((ANZ)) and Sigma Healthcare ((SIG)).

It’s the second last day for reporting season with Dicker Data ((DDR)), Harvey Norman ((HVN)), Pexa Group ((PXA)) and Virgin Australia ((VGN)) on the ticket, among many others.

The August reporting season officially ends on Monday. Check out the FNArena Calendar https://fnarena.com/index.php/financial-news/calendar/

Morgans’ response to NextDC’s ((NXT)) FY26 release after the close of trading yesterday:

“NXT’s FY26 result and FY27 guidance were slightly ahead of expectations. FY26 Underlying EBITDA lifted 15% YoY and was 4% above consensus while FY27 Underlying EBITDA guidance is for 60% YoY growth and was 8% ahead of consensus.

“The higher FY27 EBITDA comes from a faster than anticipated ramp-up of contracted MW’s. NXT reported an $82m positive NPAT in FY26.

“This was materially above expectations but included >$100m in gains on M3 and S4 sites which were revalued in accordance with revised accounting standards. 

“Management also noted NXT’s operating portfolio and Forward Order Book of 565MW are unaffected by the new proposed reforms which are currently politically topically.

“Overall, we see this as a good result and outlook. Our best guess is the stock should trade higher on this news.”

RBC Capital on smaller competitor Macquarie Technology Group ((MAQ)):

“An operationally solid FY26 with revenue/EBITDA in-line and NPAT beating by +4%. However, market arguably more focused on the outlook for IC3SW/METC.

“Commendable execution on IC3SW Phase 1 delivery on-track/on-budget given headwinds across pricing/bottlenecks with Phase 2 now locked-in for an additional 13MW by Jun-27.

“Limited incremental METC colour and management sticking with their guns on timing. Funding remains the key question and we expect MAQs debt facility headroom after IC3SW anchor client is established.

“FY27/28 EBITDA -5%/-16% primarily on lower IC3SW margin ramp-up assumptions. Rolling model forward sees $95/PT SOTP unchanged. Retain Outperform.”

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

The Software Panic Is Over

Salesforce raised its full-year revenue outlook to US$46.1 billion to US$46.4 billion.

CrowdStrike guided to nearly US$6.61 billion, and Okta’s subscription backlog for the next twelve months reached US$4.85 billion.

Investors spent months betting AI would eat these companies alive.

The quarter says AI is buying from them.

America Is Importing Its AI Buildout

The July goods deficit widened to US$118.8 billion from US$101.4 billion.

Business equipment did it, with imports of computers and chips hitting US$140.1 billion, the biggest one-month increase in more than 30 years.

Imports get subtracted from the growth math, and Barclays trimmed its third-quarter estimate by roughly half a point right after the data.

The buildout is real. The credit for it lands in someone else’s economy.

The Energy Squeeze Moved To Fuel

Crude sits near US$83, well off the summer highs, so the tape looks calm.

Refining margins say otherwise, because the Iran war and Ukrainian strikes on Russian energy sites have pulled millions of barrels of finished fuel off the market.

Diesel and gasoline are where the tightness lives now.

That is the price that shows up in freight bills and at the pump.

ANZ Bank, Australian Morning Focus

US equity markets rose, led by tech stocks (Nvidia, Software & Cybersecurity) after a strong earnings report from Nvidia, while bond yields and oil lifted slightly. 

The S&P500 was up 0.7%. The EuroStoxx50 ended its session down -0.7% while the FTSE100 lost -0.8%. 

The yield on the US 10y note rose around 2bp to 4.67%. WTI lifted 2.7% to US$83.6/bbl. Gold was weaker at US$4,603.1/oz.

The US advance goods trade deficit widened US$17.3bn to US$118.8bn in July, the widest monthly deficit since March 2025. Exports fell -2.9% m/m, while imports rose 3.7% m/m. Capital goods imports (ex autos) rose 11.3% m/m and are currently up nearly 47% y/y. 

Capital goods make up 44% of all US goods imports currently. Prior to the pandemic, the long-run average share was around 26%. The Atlanta Fed’s GDPNow tracker for Q3 stood at 4.6% saar prior to trade data, though the widening deficit should lower the estimate meaningfully.

The ECB’s July meeting minutes signalled a September rate hike is likely. While all members supported a hold at the July meeting, largely on the grounds of moving cautiously amid heightened uncertainty, some policymakers stated they would have supported a rate hike in July, and also saw a case for a mildly restrictive policy stance.

That would imply some favour rate hikes after September, where another 25bp increase would take the deposit facility rate to 2.5%, the upper threshold of the ECB’s neutral policy rate range.

We don’t think there is a strong case for additional tightening beyond September. In our view, recent inflation data have not shown inflation broadening outside the energy price shock while growth is not strong enough to warrant policy restriction.

Kevin Warsh’s speech: Markets await Warsh’s speech at Jackson Hole tomorrow. While we do not expect him to offer forward guidance, markets are hoping he will reduce some of the uncertainty surrounding the Fed’s reaction function.

We do not expect that will be forthcoming but, given recent volatility in rates markets, if Warsh offers too little, that could lead to an adverse market reaction. We would not take Warsh’s silence on the near-term policy path for anything more than a reflection of his belief in the value of clean signals from financial market pricing.

In our view, the Fed remains data-dependent and that, more than what Warsh will say tomorrow, will determine its next move.

Energy fell as hopes of the Strait of Hormuz reopening faded. Precious metals gained on strong investor demand. Supply side issues supported industrial metals. 

Nvidia’s QUARTER was bigger than TSMC’s entire year, Nigel Green, deVere Group extract

Nvidia generated more revenue in a single quarter than the company that manufactures its chips generated in the whole of last year, a comparison that puts the scale of the result into sharp focus.

Nvidia reported quarterly revenue of US$96.2 billion, up 106% year on year, with Data Center revenue alone reaching US$89 billion, up 117%.

To put that pace in context, a 106% increase means Nvidia’s revenue has more than doubled in a single year, something almost never seen in a company already generating tens of billions of dollars every quarter.

The Data Center division alone, at US$89 billion for the quarter, now generates more in three months than most global corporations generate in an entire year, and it grew even faster than the group as a whole.

Taiwan Semiconductor Manufacturing Company (TSMC), the firm that physically produces Nvidia’s chips, generated US$88.268 billion across the whole of 2024. Nvidia matched that in three months.

People have run out of ordinary language to describe growth like that. A growth rate of 106% at this size doesn’t happen by accident, and it rarely happens at all.

Companies typically grow fast or grow big. Doing both at once, at this pace and this scale, is exceptionally rare.

The company also guided to third quarter revenue of US$108 billion, ahead of the roughly US$104 billion Wall Street had pencilled in, and gave a first ever year ahead forecast pointing to 70% revenue growth through fiscal 2028.

A US$4 billion beat against consensus, in one quarter’s guidance alone, reflects genuine confidence rather than a rounding difference. Companies that are unsure of their own momentum do not guide that far above what the market already expects.

Companies this large do not usually hand investors a two-year growth number, because the risk of being wrong is enormous.

Nvidia just did it anyway, and set the bar at 70%. It signals a company that has seen something extraordinary from customers and decided to say so out loud.

Perhaps the most striking admission in the entire report was about supply rather than demand. Nvidia indicated it could be growing even faster were it not constrained by how much hardware it can physically produce.

Most companies blame slowing demand when growth cools. Nvidia is doing the opposite, telling investors demand has outrun its ability to build. This is an extraordinary position for any company to be in, let alone one already this large.

Shares moved higher and futures followed, and that seems the correct direction.

What I’m not convinced of yet is whether the market has genuinely absorbed what a 70% two year growth forecast from a company already this size actually implies for the wider AI supply chain.

Earlier volatility around the report is evidence investors are still processing the numbers in real time rather than settling on a clear view.

The share price wobbled in both directions within the same session. Sentiment clearly has not caught up with the substance yet, and that gap is worth watching closely in the weeks ahead.

The broader question for investors appears to be less about one company and more about the AI infrastructure buildout it sits at the centre of.

Every supplier, every partner and every customer named in this report is now operating inside a growth curve most of them did not expect this early, and that, in my view, reshapes the entire AI supply chain and ecosystem, not just one stock.

Corporate news in Australia:

• Pacific Current Group ((PAC)) is reviewing strategic options after River Capital proposed an $80m sale of itself to Pacific Current
• L Catterton has entered exclusive talks to acquire Australian premium dog food company Eureka Pet Co after the business sought a capital partner
• DigitalBridge has been selected as the preferred bidder for Ausgrid’s circa $3bn Plus ES smart metering business, beating a consortium comprising the Future Fund, Morrison and Aware Super
• Canadian and Japanese investors are stepping up their search for Australian acquisitions, with Quadrant-backed My Muscle Chef, which is being marketed for between $500m and $1bn, among potential targets
• Alium Capital and Partners For Growth are selling down their holdings in recently listed furniture retailer Koala Living ((KLI)) through a Barrenjoey-led ((MFG)) block trade
• Sandfire Resources ((SFR)) has appointed RBC Capital to sell its Black Butte copper project in the US
• Judo Capital Holdings ((JDO)) is reportedly holding informal discussions about a potential sale, with Bendigo and Adelaide Bank ((BEN)) and ANZ Group Holdings ((ANZ)) viewed as potential buyers
• PC Gold ((PC2)) has raised $75m through an institutional placement to accelerate the Spring Hill Gold Project, with incoming director Rick Clark and associates committing a further $2m
• Alliance Aviation Services ((AQZ)) has completed the $33m institutional component of a $40m equity raising
• Mineral Resources ((MIN)) has reinstated its dividend after reporting a record annual profit and is considering copper acquisitions as it looks for additional growth opportunities
• Corporate Travel Management ((CTD)) has released its audited FY25 accounts, moving the company closer to resuming trading on the ASX
• Broken Hill Mines ((BHM)) and Falcon Metals ((FAL)) are raising fresh equity to accelerate their Australian gold and silver projects amid renewed investor demand for precious metals

On the calendar today:

-JP Aug Tokyo CPI

-JP July Unemployment

-US Aug Chicago PMI

-US Aug Kansas Fed services

-US Aug U.Mich senitment

-CA June GDP

-CA June GDP

-CA June GDP

-GE Aug Unemployment

-GE Aug Unemployment

-GE Aug Unemployment

-3P LEARNING LIMITED ((3PL)) ex-div 3.52c (8%)

-AIR NEW ZEALAND LIMITED ((AIZ)) FY26 earnings report

-ARGO GLOBAL LISTED INFRASTRUCTURE LIMITED ((ALI)) ex-div 5.50c (100%)

-BEACH ENERGY LIMITED ((BPT)) ex-div 2.00c (100%)

-COBRAM ESTATE OLIVES LIMITED ((CBO)) FY26 earnings report

-CHANNEL INFRASTRUCTURE NZ LIMITED ((CHI)) FY26 earnings report

-CAPRICORN METALS LIMITED ((CMM)) FY26 earnings report

-CLEANSPACE HOLDINGS LIMITED ((CSX)) FY26 earnings report

-DALRYMPLE BAY INFRASTRUCTURE LIMITED ((DBI)) ex-div 6.75c

-DICKER DATA LIMITED ((DDR)) FY26 earnings report

-FIDUCIAN GROUP LIMITED ((FID)) ex-div 28.20c (100%)

-GRYPHON CAPITAL INCOME TRUST ((GCI)) ex-div 1.37c

-HARVEY NORMAN HOLDINGS LIMITED ((HVN)) FY26 earnings report

-INTEGRAL DIAGNOSTICS LIMITED ((IDX)) ex-div 6.00c (100%)

-IMMUTEP LIMITED ((IMM)) FY26 earnings report

-INGENIA COMMUNITIES GROUP ((INA)) ex-div 4.80c

-IRESS LIMITED ((IRE)) ex-div 14.00c (100%)

-KKR CREDIT INCOME FUND ((KKC)) ex-div 1.67c

-MCMILLAN SHAKESPEARE LIMITED ((MMS)) FY26 earnings report

-MYSTATE LIMITED ((MYS)) ex-div 12.50c (100%)

-NOBLEOAK LIFE LIMITED ((NOL)) FY26 earnings report

-ORORA LIMITED ((ORA)) ex-div 4.00c

-PERPETUAL CREDIT INCOME TRUST ((PCI)) ex-div 0.62c

-PERSEUS MINING LIMITED ((PRU)) FY26 earnings report

-PEXA GROUP LIMITED ((PXA)) FY26 earnings report

-QUICKFEE LIMITED ((QFE)) ex-div 0.50c

-REGAL PARTNERS LIMITED ((RPL)) ex-div 12.00c (100%)

-SEA FOREST LIMITED ((SEA)) FY26 earnings report

-SHAPE AUSTRALIA CORPORATION LIMITED ((SHA)) ex-div 18.00c (100%)

-SKY NETWORK TELEVISION LIMITED ((SKT)) FY26 earnings report

-360 CAPITAL MORTGAGE REIT ((TCF)) ex-div 5.00c

-VIRGIN AUSTRALIA HOLDINGS LIMITED ((VGN)) FY26 earnings report

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

The Australian share market over the past thirty days…

For more detail go to FNArena’s Australian Broker Call Report, which is updated each morning, Mon-Fri.

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