AI Bounced. Nvidia Still Has to Prove It.

GOOD MORNING, Tuesday gave the AI trade a much-needed rebound. AMD surged after announcing a deal that could supply Meta with as much as $60 billion of AI chips over five years, software stocks bounced after weeks of disruption fears, and the Philadelphia Semiconductor Index closed at a record. A surprise reduction in Trump's temporary global tariff to 10% also removed one layer of macro pressure. But the real test arrives next: Nvidia reports Wednesday with investors asking whether record Big Tech capex is still turning into record chip demand — and whether that growth is enough to defend Nvidia's economics as hyperscalers build more custom silicon of their own.

MARKETS | TLDR

Wall Street rebounded with technology leading: The Dow rose 0.76% to 49,174.50, the S&P 500 gained 0.77% to 6,890.07 and the Nasdaq advanced 1.05% to 22,863.68 as investors bought the dip in AI-linked stocks.
Semiconductors hit another record: The Philadelphia Semiconductor Index closed at a record as AMD jumped about 9% and Intel gained roughly 6%, showing infrastructure demand remained stronger than recent AI-disruption fears suggested.
Tariff pressure eased at the margin: Trump's temporary global tariff was lowered back to 10% after he had floated a 15% rate over the weekend, giving markets a less punitive near-term trade-policy baseline.

AI BROADENS

Meta Just Gave AMD a $60 Billion AI Opening

AMD said it could sell Meta up to $60 billion of AI chips over the next five years in a deal that also gives the Facebook parent the right to acquire as much as 10% of AMD. AMD shares jumped 8.8% Tuesday, while Meta edged higher.

That matters because one of the biggest questions in the AI infrastructure trade is whether hyperscaler spending can support multiple accelerator vendors rather than simply reinforce Nvidia's dominance. A long-term Meta commitment gives AMD both a major customer and a visible path to convert product progress into revenue.

The strategic signal is bigger than the headline number. Meta wants more supplier diversity, better bargaining power and more control over its compute costs. AMD wants proof that customer wins can scale into sustained share gains. The deal gives both sides what they need — and raises the bar for Nvidia one day before earnings.

EXPECTATION TEST

Nvidia's Beat Is Becoming the Price of Admission

Nvidia enters Wednesday's earnings report with Big Tech expected to spend roughly $630 billion on capital investment, much of it tied to AI infrastructure. Wall Street still expects extraordinary growth from the company, but Nvidia shares were up only about 2% for the year heading into the report despite the broader AI buildout remaining intact.

That matters because investor questions have moved beyond demand. The market now wants to know whether Nvidia can keep its pricing power and margins as Google, Amazon, Meta and Microsoft put more resources into custom chips and as AMD wins larger contracts. Strong industry spending no longer guarantees that every incremental dollar accrues to Nvidia.

The expectation bar is therefore asymmetric. A weak quarter would challenge the entire AI infrastructure thesis, while another routine beat may simply confirm what investors already assume. Nvidia has to prove not only that demand remains huge, but that its share of the economics remains exceptional.

HEADLINES

Software stocks stage a partial AI relief rally: The S&P Software & Services index rose 1.3% after losing more than 20% in less than four weeks, suggesting investors were willing to reconsider whether AI disruption had been priced too aggressively.
Anthropic launches new enterprise plug-ins: New tools for investment banking, HR and engineering were developed with partners including Salesforce, FactSet and Thomson Reuters, shifting the narrative from pure disruption toward incumbents integrating AI into existing workflows.
Thomson Reuters jumps 11.5%: The stock posted its biggest gain since 2008 after appearing as an Anthropic partner, a reminder that AI can expand the value of proprietary data and distribution rather than simply destroy legacy businesses.
Home Depot beats and holds guidance: Shares rose 2% after the retailer topped quarterly estimates and maintained its annual outlook, providing a steadier consumer signal underneath the AI-driven market volatility.
Oil slips on U.S.-Iran deal hopes: Crude fell about 1% as investors priced some possibility of diplomatic progress, slightly easing the inflation backdrop ahead of later-week U.S. data.

UPCOMING

Nvidia earnings — February 25: The report is the clearest near-term test of whether roughly $630 billion of Big Tech capex is still translating into enough accelerator demand to support Nvidia's valuation and margins.
January PPI — February 27: Producer prices will show whether tariff costs and firm service-sector pricing are keeping inflation sticky enough to delay Fed easing.
U.S.-Iran talks — February 27: Continued negotiations matter directly for crude because any credible path toward a nuclear agreement could remove part of the geopolitical premium embedded in oil.
OPEC+ meeting — March 1: Producers are expected to discuss another modest output increase, adding a supply-side variable to a market already driven by Iran diplomacy.

DEEP INSIGTHS

Nvidia's Biggest AI Test Yet

Read this for the shift in what investors now require from Nvidia. The issue is no longer whether Big Tech is spending on AI — that spending is enormous. The question is whether Nvidia can keep enough share, pricing power and margin as hyperscalers develop cheaper custom alternatives.

AMD's Meta Deal Broadens the Accelerator Market

The Meta agreement matters because it turns supplier diversification from a theoretical risk to Nvidia into a multi-year commercial commitment. AMD gains a marquee customer, while Meta gains leverage and a second path for AI compute beyond the dominant GPU platform.