Nasdaq's Rally Post-Nvidia Earnings and the Resilience of the AI Trade

The Nasdaq Composite’s post-earnings rally in August 2025, driven by Nvidia’s Q2 2026 results, underscores the enduring resilience of the AI trade despite short-term volatility. Nvidia’s $46.74 billion revenue—surpassing estimates by 1.6%—and 56% year-over-year growth in its data center segment [2] solidified its role as a bellwether for AI infrastructure demand. However, the stock’s 2% post-earnings decline, attributed to cautious guidance and geopolitical headwinds like the absence of H20 chip sales to China [4], created a divergence between the Nasdaq and S&P 500. While the S&P 500 edged higher, nearing record levels, the Nasdaq’s 0.28% rise reflected its concentration in AI-driven tech stocks [3].

Technical Divergence and Sector Momentum

The Nasdaq 100’s technical indicators highlighted its resilience. The index closed above both its 50-day and 200-day moving averages at 23,525.29, signaling sustained bullish momentum [1]. However, a negative RSI divergence suggested potential for a short-term correction, even as the 5-day moving average rose 2.42% [2]. In contrast, the S&P 500’s stability—supported by broader economic fundamentals and sectors like industrials—masked its reliance on non-tech earnings growth [3]. This divergence illustrates how the Nasdaq’s performance is increasingly decoupled from macroeconomic signals, instead reflecting sector-specific AI momentum.

The AI sector’s strength is evident in its earnings resilience. Nvidia’s Blackwell AI platform drove a 17% sequential increase in data center revenue [4], while Snowflake’s AI tools contributed to 32% year-over-year revenue growth [1]. Even smaller players like Innodata and Quantum Computing saw extraordinary returns, with the latter achieving a 2,275% total return in 12 months [1]. These trends align with projections of $3–$4 trillion in AI infrastructure spending by 2030 [4], reinforcing the sector’s long-term appeal.

Fundamental Drivers of AI Resilience

Fundamentally, the AI trade is underpinned by structural growth. Nvidia’s gross margin of 72.4% [4] and $60 billion in new share buybacks [4] signal confidence in its competitive moat, even as it faces rising competition from AMD and Intel. Meanwhile, U.S. private AI investment reached $109.1 billion in 2024, dwarfing China’s $9.3 billion [1], and global AI infrastructure spending is expected to grow at a 30% CAGR through 2030 [2]. These fundamentals justify the sector’s premium valuations, despite short-term concerns over overbought conditions.

Geopolitical risks, such as the $4 billion revenue drag from missing H20 sales to China [4], remain a wildcard. Yet, even with these constraints, Nvidia’s Q3 guidance of $54 billion—excluding potential H20 sales—demonstrates robust demand for its AI chips [4]. Analysts at JPMorgan and Citi have raised price targets, betting on the AI bull market’s continuation [1].

Conclusion

The Nasdaq’s post-earnings rally and the AI sector’s resilience highlight a market where technical momentum and fundamental growth align. While the S&P 500’s broader economic exposure introduces caution, the Nasdaq’s focus on AI-driven innovation positions it to outperform in the long term. Investors should monitor technical levels like the 50-day moving average and RSI for signs of a correction, but the sector’s fundamentals—anchored in AI infrastructure spending and earnings growth—suggest the rally is far from over.

Source:
[1] AI-Driven Stocks and Market Volatility in August 2025 [https://www.ainvest.com/news/ai-driven-stocks-market-volatility-august-2025-assessing-momentum-fundamentals-nvidia-snowflake-2508/]
[2] NVIDIA 2026 Q2 Financial Results [https://morethanmoore.substack.com/p/nvidia-2026-q2-financial-results]
[3] Stock Market Today: Nasdaq Rises 0.28%, Dow Falls as ... [https://www.tradingnews.com/news/stock-market-today-nasdaq-rises-0-28-percent-dow-falls-as-nvidia-earnings-shake-wall-street]
[4] NVIDIA Announces Financial Results for Second Quarter [https://nvidianews.nvidia.com/news/nvidia-announces-financial-results-for-second-quarter-fiscal-2026]