Key Takeaways
- Nvidia’s size and influence on the broader market mean its results, due after Wednesday’s closing bell, will likely affect a wide range of investors.
- In recent quarters, the chipmaker’s quarterly update has tended to be a sell-the-news event in the short term, but Nvidia’s stock has climbed in the months following the results.
A lot is at stake when the world’s most valuable public company reports earnings Wednesday.
Nvidia’s (NVDA) latest quarterly financial update, due after the closing bell, is being widely viewed as the biggest event of this earnings season. It could have wide-reaching implications for the AI trade and the broader stock market.
A strong showing from the chipmaker at the heart of the AI boom, viewed as a bellwether for the industry, could prove just what the market needs to revive confidence in the AI rally that boosted shares of Nvidia, its partners, and stocks across industries this year, pushing the major indexes to a series of record highs.
However, with expectations riding high and signs investors may be more difficult to impress amid persistent worries that elevated stock valuations have created an AI bubble, the stock could be primed for punishment if Nvidia’s results are anything less than stellar.
Why This Matters for Investors
Nvidia’s quarterly results and outlook could sway sentiment surrounding a host of stocks tied to the AI boom. The chipmaker’s outsized influence on major indexes and funds that track them also means a big move in its stock would affect a wide range of investors.
With the chipmaker facing a particularly challenging setup heading into Wednesday night’s event, some investors are already bracing for enhanced volatility in its wake. Options pricing suggests traders see shares swinging roughly 7% in either direction by the end of the week.
Nvidia’s outsized influence on major indexes—with a market capitalization of around $4.4 trillion, the stock accounts for about 8% of the S&P 500—also means a big move in its stock would impact the market broadly. And if Nvidia’s shares soar or slump, those of its partners and others related to AI likely will too.
Even if you don’t hold Nvidia stock directly, a big share price move could affect you if you hold money in broad market index funds through brokerage accounts or tax-advantaged retirement accounts such as a 401(k) or IRA. Options pricing indicates traders expect the S&P 500 could move close to 2% in either direction by the end of the week, affecting a wide swath of investors and savers.
In recent quarters, the AI chipmaker’s quarterly report has tended to be a sell-the-news event, with the stock finishing the week of its earning lower than its levels heading into the event in three of the last four quarters, despite strong results. However, Nvidia’s stock has typically picked up in the months that followed.
The shares, which slid nearly 3% Tuesday amid broader losses, have still added over one-third of their value this year so far. Most Wall Street analysts surveyed by Visible Alpha believe the stock has room to rise.
