Before the bell: AI market may expand further

Nvidia jumps 9% and lifts Nasdaq to a 2% gain. Real estate stocks in Brussels join the rally. LVMH, led by Trump fan Bernard Arnault, reports solid earnings.

Nvidia (+8.8%) and many other chip and AI stocks that took a hit on Monday rebounded strongly yesterday. The Nasdaq gained 2%. Broadcom, which dropped nearly 15% alongside Nvidia on Monday, only recovered by 2.6%. A possible explanation is not necessarily that investors are convinced Nvidia is untouchable. It could be more of a trading-driven move than fundamentally motivated. Besides being a wealth creator, Nvidia is by far the most actively traded stock. After a prolonged rally, the FOMO effect is stronger than fear. Experts believe it’s still too early to determine how the AI market and its surrounding ecosystem will evolve. Thanks to Chinese DeepSeek, there seems to be a potential drop in AI investment costs. This could expand the market, ultimately increasing overall revenue for suppliers. New competitors may emerge from unexpected corners, including smaller players. More opportunities, but also more risks. It’s also encouraging to see life outside of tech. In Brussels, real estate stocks stood out, with Montea (+3.2%), Home Invest (+2.7%), and Cofinimmo (+2.4%) gaining ground. UCB (+1.4%) was once again among the winners after yet another price target upgrade.

In Asia, Alibaba announced the launch of a new version of its AI model, claiming it outperforms DeepSeek’s. While Chinese stock markets remain closed for the Lunar New Year, Alibaba already gained 6.7% on Wall Street yesterday. In the U.S., expectations are that the Fed will keep interest rates unchanged today, while Microsoft and Meta, two major big-tech players, will report earnings after the market closes.

ASML delivers reassuring results

The standout highlight was the robust order book: at 7.1 billion euros, orders flowed in at twice the expected rate in Q4. Quarterly revenue landed at 7.09 billion euros, slightly above expectations. The outlook for 2025 aligns with forecasts, with expected revenue between 30 and 35 billion euros. It remains to be seen whether this will win back investors’ confidence.

Not yet ultra-luxurious, but solid results from LVMH

With an 18% share price increase this year and Novo Nordisk’s pullback, LVMH is once again Europe’s most valuable company, boasting a market cap of 363 billion euros. After a challenging period, LVMH reported solid and slightly better-than-expected 2024 results. Luxury leather goods, perfumes, and other highly coveted premium products generated 84.7 billion euros in revenue, a modest 1% growth. Operating profit remained high, but still declined 14% to 19.6 billion euros. Wine and spirits also struggled, with profits down 36%, while luxury retail, particularly cosmetics, was the only segment to maintain stable profitability. CEO Bernard Arnault had three key messages: 1) LVMH will continue to rigorously manage costs; 2) the focus remains on creating highly desirable designs; and 3) market conditions improved in Q4 compared to Q3. If Chinese consumers start spending again, the outlook could improve even further. As Europe’s wealthiest individual, Arnault also mentioned that LVMH is considering expanding production in the U.S. He and his family attended Donald Trump’s presidential inauguration, commenting that “returning to France feels like a cold shower compared to the dynamism of the U.S.”

The six largest European luxury groups by market capitalization and valuation (P/E ratio):

• LVMH – 377 billion euros, P/E 27
• Hermès – 281 billion euros, P/E 62
• Richemont – 92 billion Swiss francs, P/E –
• Ferrari – 78 billion euros, P/E 51
• Christian Dior – 125 billion euros, P/E 21
• Kering – 32 billion euros, P/E 15

Did you know…

DeepSeek founder Liang Wenfeng (40) was not taken seriously by his business partners for a long time? “When we first met him, Liang was a nerd with a terrible haircut and impossible ambitions.”

This article was translated from Dutch and was originally published on Spaarvarkens.be.