The nearly $3 trillion surge in Nvidia Corp.’s market value over the past two years, fueled by the unveiling of ChatGPT, has significantly reshaped the U.S. stock market. Nvidia, a leading player in artificial intelligence (AI) chipmaking, now wields immense influence across multiple equity indexes.
This influence was evident during the recent market turbulence earlier this month and the subsequent recovery, where the S&P 500 Index regained $4 trillion in market capitalization between August 5 and August 23, driven largely by Nvidia’s 28% stock price rally. With Nvidia set to release its earnings after the market closes on Wednesday, traders are bracing for potential market volatility.
Nvidia’s shares dipped by as much as 0.8% in early trading on Wednesday. Options market data suggests that Nvidia’s earnings could trigger a near 10% swing in its share price—potentially shifting around $300 billion in market capitalization. As the second-largest company in the S&P 500, accounting for 6.7% of the index, Nvidia’s performance has far-reaching implications. It also holds significant weight in the Nasdaq 100 and the Philadelphia Semiconductor Index, with 8% and 14% weightings, respectively.
“Nvidia is the purest play for investors to gauge the health of the AI infrastructure sector,” said John Belton, portfolio manager at Gabelli Funds. “Its earnings are closely monitored because they directly impact many companies in the AI value chain.”
Focus on Revenue Growth
The spotlight will be on Nvidia’s revenue growth, especially after earlier reports from AI giants like Alphabet Inc. and Amazon.com Inc. highlighted massive capital expenditures with only modest revenue gains. Nvidia has consistently exceeded expectations over the past five quarters, largely due to its position as the primary beneficiary of the billions being poured into AI development. Any deviation from this trajectory could raise questions about the broader potential of AI technology. Nvidia’s transformation from an obscure semiconductor manufacturer to a barometer of U.S. economic strength is nothing short of remarkable.
“It shouldn’t be a bellwether for the economy,” said Shana Sissel, founder and president of Banríon Capital Management. “But it has become one due to its size and impact on the overall market.” Analysts project Nvidia’s quarterly revenue to reach around $29 billion, more than double what it reported a year ago, with further growth expected in future guidance. However, there’s a potential stumbling block—the company is expected to provide an update on its next-generation Blackwell chip amid reports of delays and design issues. Nvidia previously stated that production would ramp up in the second half of the year.
“Concerns about potential delays with the Blackwell chip could temper expectations for fiscal 2025, making management’s commentary—particularly a positive 2025 outlook—crucial,” wrote Bloomberg Intelligence analysts led by Kunjan Sobhani in an August 21 note.
Parsing the Commentary
Analysts and investors will be scrutinizing any statements regarding Blackwell during the earnings call, much like they would dissect a Federal Reserve announcement, according to Howard Chan, CEO of Kurv Investment Management.
“Every word will be analyzed,” Chan said.
There will also be keen interest in demand for Nvidia’s H-200 chip, which could potentially offset any delays with Blackwell. If Nvidia delivers strong results with its current chip lineup, it could be an encouraging sign for the next-generation product.
“If they post strong numbers due to demand for the H-200, it bodes well for Blackwell’s demand next year,” noted Gabelli’s Belton.
Wall Street remains largely optimistic about Nvidia’s prospects. The stock has 66 buy ratings, 8 holds, and no sell recommendations, according to Bloomberg data. The 12-month price target is around $145, implying a potential 14% gain from current levels. Nvidia’s valuation has also become more attractive, with the stock trading at a forward price-to-earnings ratio of about 38 times, down from 44 times in June and over 60 times last year. In comparison, the S&P 500 trades at around 21 times forward earnings.
Despite concerns over sustained AI investment and potential issues with the Blackwell chip, Nvidia’s recent stock performance indicates that investors remain eager to buy on dips, as the AI-driven tech rally shows no signs of slowing.
“The bar has been raised in recent quarters,” said Belton. “Given the performance of megacap stocks this earnings season, the market is expecting a strong beat and forward guidance that exceeds expectations. The recent run-up in Nvidia’s stock price makes near-term performance all the more critical.”
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