US pre-open: Stocks seen mostly higher as Nvidia surges

US stock futures pointed to a mostly higher open on Thursday, boosted by strong results from Nvidia.

At 1230 BST, Dow Jones Industrial Average futures were down 0.3%, but S&P 500 and Nasdaq futures were up 0.6% and 1.9%, respectively.

Nvidia was providing a lift, up 28% in pre-market trade as it forecast second-quarter revenue above analysts’ estimates.

Derren Nathan, head of equity research at Hargreaves Lansdown, said: "Revenues of $7.2bn were down 13% against the same period last year but ahead of $6.5bn consensus forecast. But it was guidance for about $11bn of revenue in the current quarter, more than 50% more than market forecasts, that caused most of the excitement.

"The explosion in AI, driven by the emergence of intelligent chatbots like Chat GPT is helping NVIDIA to buck the trend in an otherwise weak semiconductor market. The valuation now stands at an eye-watering 23 times forecasted full year sales and nearly 60 times earnings. With analyst’s predicting sales growth of just 21% these multiples look a little rich, suggesting that either growth needs to accelerate to justify their heady heights, or that the valuation will moderate.

"The race is getting closer and it’s likely that analysts will upgrade their forecasts today. With no full year guidance given by the company, how much remains to be seen."

Investors will also be keeping an eye out for any developments regarding debt ceiling negotiations, as the White House and Republicans have yet to reach an agreement.

Fitch Ratings put the US′ AAA long-term foreign-currency issuer default rating on ‘negative watch’.

The ratings agency said it still expects a resolution to the debt limit before the deadline.

"However, we believe risks have risen that the debt limit will not be raised or suspended before the x-date and consequently that the government could begin to miss payments on some of its obligations," it said.

"The brinkmanship over the debt ceiling, failure of the US authorities to meaningfully tackle medium-term fiscal challenges that will lead to rising budget deficits and a growing debt burden signal downside risks to US creditworthiness."

On the macro front, first-quarter GDP figures are due at 1330 BST, along with the latest jobless claims data. Pending home sales for April are scheduled for release at 1500 BST.