tech
Why some investors see ‘trouble in paradise’ after Nvidia earnings
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TL;DR
- Nvidia's fourth-quarter earnings showed nearly doubled profits and record sales, but shares fell in late trading.
- Investors have grown accustomed to Nvidia consistently exceeding earnings estimates, making 'very good' results no longer sufficient.
- Concerns exist about customers' ability to sustain high spending on AI chips, as hyperscalers have reported declining or flattening free cash flow.
- Nvidia's purchase obligations surged to $95 billion, indicating a demand for non-cancellable orders placed before actual demand is known.
- Some investors are exploring hedging strategies and short positions against AI-related companies, anticipating a potential market shakeout.
- Apple, by contrast, has benefited from its cautious approach to AI spending, acting as a relative safe haven.