London midday: Stocks fall as investors mull Nvidia results; ex-divs weigh

(Sharecast News) - London stocks had fallen into the red by midday on Thursday, with US chip maker Nvidia in focus after its second-quarter earnings failed to impress, with ex-dividends taking some of the shine off markets. The FTSE 100 was down 0.4% at 9,216.76.

Neil Wilson, UK investor strategist at Saxo Markets, said the Nvidia results were "great but not great enough to satisfy some whisper numbers that were higher than consensus forecasts".

He continued: "Shares sold off a touch over 3% in the after-hours market chiefly because data centre revenues - the key AI bit of the business - were a tad lighter than expected. And despite the upbeat guidance for the current quarter that was a little ahead of expectations, the outlook on China remains a bit murky.

"Data centre revenue rose 56% year-on-year to $41.1bn, short of an estimated $41.34bn. The company said that $33.8 billion of Nvidia's data centre sales were for Nvidia's GPU chips, down 1% from the first quarter because of $4bn fewer H20 sale because it sold none of these chips to China in the quarter. Relaxation of export controls could see Nvidia sell between $2bn and $5bn in H20 chips this quarter - sales not included in the revenue guidance.

"Don't forget gaming - hardly the powertrain of this stock's massive rerating but still important and impressive, with revenues up 49% to $4.3bn, a fresh record for a quarter and well ahead of expectations. Notable also to look at Nvidia's other income, which at $2.2bn was driven by its stake in CoreWeave, an AI company offering access to Nvidia GPUs that rose 1755 over the last quarter."

In equity markets, Aviva, Croda, LondonMetric, Auto Trader and Games Workshop lost ground as they traded without entitlement to the dividend.

Drax tumbled after saying it's being investigated by the Financial Conduct Authority over statements regarding biomass sourcing.

In a brief statement, the company said the regulator has begun an investigation covering the period from January 2022 to March 2024.

It relates to certain historical statements about Drax's biomass sourcing "and the compliance of Drax's 2021, 2022 and 2023 annual reports with the Listing Rules and Disclosure Guidance and Transparency Rules".

Russ Mould, investment director at AJ Bell, said: "Having previously drawn fire from the media for the sourcing of wood for its biomass pellets, Drax now faces the potentially more serious situation of being under the harsh glare of the Financial Conduct Authority over the same issue.

"Notably the investigation covers several years' worth of accounts and follows accusations from one of its former top lobbyists earlier this year at an employment tribunal that it had misled regulators, the government and the public.

"Drax was already fined a meaningful sum by Ofgem almost exactly a year ago for inaccurate data on sourcing for its pellets.

"There will be concern about any sanction levied by the FCA but also what it might mean for the subsidies the company continues to receive from government.

"The share price reaction shows the market is concerned about the impact this could have on the business and, while the company is important to the UK's energy security, that doesn't mean it can escape scrutiny on its sustainability credentials."

Precision engineering group Hunting fell as it held full-year guidance but cautioned that market uncertainty could impact results.

On the upside, IT infrastructure firm Softcat rallied after saying it expects to deliver high-teens growth in full-year gross profits and mid-teens growth in FY operating profits as it continued to trade well during the fourth quarter, supported by further conversion of larger solutions projects.