Martin Gamble on US markets: Nvidia fuels AI financing boom as Cisco slips

US markets hit fresh highs this week buoyed by strength in technology stocks and benign inflation data which helped to push bond yields down as markets priced in a lower chance of a rate hike from the Federal Reserve next month.

Consumer price inflation rose 0.1% in July taking the annual rate to 3.4% from 3.5% in the prior month while the core rate, excluding volatile food and energy prices increased 0.2%, taking the annual rate to 2.5%, essentially in line with economists’ forecasts.

Meanwhile, July producer prices were unchanged compared with a 0.2% expected increase and the core rate increased by 0.2%, less than anticipated.

Memory chip maker Sandisk jumped by 25% after the company projected mid to high teens annual revenue growth for the rest of the decade and pledged to return 100% of free cash flow to shareholders.

At the other end of the performance spectrum lifestyle brands owner Tapestry was the biggest faller in the S&P 500 after projecting 2027 revenues below analysts' expectations.

Nvidia creates AI financing platforms

The AI chipmaker said it is partnering with major US investment firms including BlackRock and Goldman Sachs to raise $500 billion for artificial intelligence infrastructure.

The idea is to broaden access to Nvidia-based infrastructure to facilitate investment opportunities for large asset managers and private equity investors.

Nvidia CEO Jensen Huang said the company has the option to backstop up to $125 billion, or 25% of the potential deals.

“These financing platforms will help customers access scarce compute at scale and build the AI factories that will power every industry and country in the age of AI,” said Huang.

The specifics of how the funding will work in terms of the debt and equity structure and whether Nvidia will act as guarantor rather than a direct lender is not clear.

Nvidia whose shares rose on the day (10 August) of the news and is due to announce earnings on 26 August.

Cisco sees margin pressure offset strong growth

Expectations were riding high going into quarterly earnings for network equipment maker Cisco, with the shares rising more than 20% in the past month, and 60% year-to-date.

Despite reporting earnings ahead of analysts’ estimates and management projecting full year revenues above expectations, the shares fell, amid profit taking and worries over margins.

While Cisco demonstrated strong AI infrastructure momentum with triple-digit sales growth, that came at a cost as it is hardware-heavy and lower margin than Cisco’s traditional networking/software mix.

These mix effects diluted gross margins while Cisco’s projected margins of 65% to 66% also fell short of analysts' forecasts.

Cisco said it expects first quarter revenues in a range of $18 billion to $18.2 billion and 2027 financial year revenues between $72.2 billion and $73.4 billion. Both projections are comfortably ahead of analyst estimates of $16.8 billion and $68.7 billion, respectively.

The company expects 2027 earnings per share between $5.05 and $5.11 compared to analysts’ estimates of $4.80.

Coreweave and Nebius post blowout numbers

Results from neo-cloud providers Coreweave and Nebius were well received with the shares rising 20% and 34% respectively, reflecting stronger than expected revenue growth amid booming demand for AI cloud infrastructure.

Coreweave, the larger of the two companies, raised full year 2026 revenue guidance to a range of $12.4 billion to $12.2 billion supported by a revenue backlog which surged 246% year-on-year to $104 billion.

The company has secured $21 billion of compute capacity from Meta through to 2032 and a multiyear deal with Anthropic to power its Claude AI models.

To meet demand Coreweave increased expected capital expenditures to a range of $35 billion to $39 billion from $31 billion to $35 billion.

Despite surging revenues, net losses widened to $626 million as operating expenses rose and net interest costs increased to $640 million reflecting higher net debt.

Nebius reported a six-fold increase in revenues to $582.3 million versus expectations of $570 million. Management reaffirmed 2026 revenue guidance which calls for $3 billion to $3.4 billion.

The company swung to a positive adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) of $236.2 million from a $21 million loss in the prior year.

Management expects customer prepayments to provide more than $9 billion of funding which represents around 40% of the $20 billion to $25 billion of planned 2026 capital expenditures.