Skip to main content

Nvidia Results Could Make or Break the AI Trade This Week

Stocks are entering the final week of August on a wave of optimism, thanks to Federal Reserve Chair Jerome Powell’s surprisingly dovish tone at Jackson Hole. His suggestion that the “shifting balance of risks may warrant adjusting our policy stance” opened the door for a September interest rate cut, sending the Dow Jones to record highs and putting the S&P 500 within striking distance of its own. Futures markets now assign roughly an 85% chance of a quarter-point cut next month, according to CME data, reinforcing a rally that, in many ways, feels like it is leaning on Powell’s words as much as fundamentals. Against this backdrop, Nvidia’s (NVDA) earnings on Wednesday have become the focal point, with investors waiting to see if the AI leader can validate the extraordinary gains tech stocks have delivered over the past year. Nvidia is not just another company, it is the bellwether of the AI trade, with its GPUs powering everything from hyperscale data centers to AI research at the biggest firms in the world. Analysts expect second-quarter revenue to top $46 billion, a 54% year-over-year jump, alongside EPS growth of nearly 50%. Options markets are bracing for volatility, implying a 6% move in either direction after results. 

As Eric Beiley of Steward Partners noted, “Nvidia is absolutely critical for the broader market because any sign of strength could reignite momentum… the risk is that all this AI investment could be nearing a peak.” That captures the dilemma well: Nvidia has become so central to investor psychology that its numbers might steer more than just its own stock.

The week is not only about Nvidia, though. The Personal Consumption Expenditures (PCE) index—due Friday, could complicate Powell’s carefully balanced message. Economists expect core PCE to rise to 2.9% year-over-year, the fastest since February, showing that tariff-driven price pressures are persisting. If inflation does accelerate, the Fed may find itself forced to tread carefully even while job market concerns rise. To me, this creates a slightly uneasy contradiction: markets are rallying on rate-cut hopes, yet the inflation data could easily undercut that narrative. It feels premature to assume smooth sailing. Meanwhile, corporate earnings from Dell, Best Buy, Dick’s Sporting Goods, Dollar General, and Abercrombie & Fitch will provide important insights into consumer demand, though none carry the market-shifting weight of Nvidia’s report.

The broader question is whether this AI-driven rally is sustainable or merely reflecting concentrated enthusiasm. Nvidia trades at more than 56 times forward earnings, a valuation that requires nearly flawless execution. If results disappoint, or if management’s guidance turns cautious, stocks could quickly lose their footing, especially with indexes already hovering at record highs. On the other hand, another blowout quarter would reinforce the idea that AI spending is still accelerating and justify further gains. 

Personally, I think the market is a bit too eager to extrapolate Nvidia’s growth into a permanent trend; while its dominance is undeniable, no company can sustain hypergrowth forever, particularly in such a cyclical sector. Still, for now, Nvidia’s results and Powell’s tone form the twin pillars holding up this market. The coming days will reveal whether that foundation is strong enough to keep the rally intact, or whether cracks are about to show.

Comments

Post a Comment

Popular posts from this blog

What's Really Going On With US Stocks and China Tariffs

 Trade talks between the US and China are once again trending in the markets, this time pushing the markets upward. Now, Goldman Sachs Research confidence suggests that the  S&P 500 Index , which tracks 500 of the largest US companies, will go up  11% over the next year  to 6,500, mainly on the back of better trade relations and the chances of lower tariffs. Tariffs are taxes that governments put on imported goods. If the United States levies tariffs on Chinese products, American companies would have to pay higher prices when importing from China. Those companies could turn around and pass on the increased prices to the end consumers, absorb them themselves and hit their profits, or communicate these costs to suppliers. Investors are watching to see which companies will be hammered the hardest. Recent earnings did look good; US companies saw profits grow by 12% year over year last quarter, but that was before the effect was being felt from the new tariffs was fel...
Post a Comment
Read more

Best Stocks to Watch According to Top Analysts

Markets always remain uncertain, inflation being the theme, rate policy is the other, with geopolitical tension thrown in between. Double wondering, long-term investors prefer to refuse to hear any temporal noise. Instead, there are companies with structural tailwinds, margin expansion stories, and consistent execution on their radar. Here is a list of six names that have really been shining as of today. Chewy (CHWY) Doug Anmuth from JPMorgan remains bullish with an upward target revision to $47 for Chewy. The market punishment was too harsh for free cash flow going down, especially since customer count was up and Autoship engagement was stronger. This is an underestimated name in my opinion. Pet care is sticky spending, and Chewy's building recurring revenue through Autoship should have some resilience against investor thoughts. Execution has gotten better, and if the company can maintain its margin trajectory, it can have real upside. Pinterest (PINS) Bank of America sees very st...
Post a Comment
Read more

Markets Begin the Week Mixed Amid Global Trade Uncertainty

Asian markets opened the week on a mixed note after Wall Street hit new highs. Tokyo and Shanghai were up, but the Hang Seng and Taiwan’s Taiex were down, reflecting the global uncertainty despite a brief bout of optimism. Much of the bullishness in the US was triggered by Canada’s about-face on taxing US tech companies, which got trade talks back on track. According to the  Associated Press , Canadian Prime Minister Mark Carney said talks were back on, and markets were calm. Result? The S&P 500 rose 0.5% to 6,173.07, the Nasdaq 20,273.46 and the Dow 1% to 43,819.27. It wasn’t just tech that was driving the rally. Almost every sector in the S&P 500 was up, including  Nike , which rose 15.2% despite warning of a tariff hit to earnings. That’s kind of the theme of the week. In Asia, Japan’s Nikkei 225 was up 0.6% and China’s Shanghai Composite 0.5%, possibly helped by a slight improvement in factory activity after US-China tariffs were postponed in May. But Chinese manuf...
Post a Comment
Read more