Nvidia’s earnings will be in focus next week as the stock tries to maintain record levels
All eyes will be on Nvidia next week as investors consider what’s next for AI trading. Stocks hit all-time highs this week, surpassing one milestone after another as falling inflation data left investors worried the Federal Reserve could keep interest rates higher for a longer period of time. The Dow Jones Industrial Average surpassed 40,000 for the first time. The S&P 500 also surpassed the 5,300 level for the first time. The S&P 500 has set record after record in 2024. But what’s different about this latest gain is that the broad market benchmark has managed to reach all-time highs without help of “Magnificent Seven”. Completely dominated the early part of this year’s rally. This quarter, the top-performing sector in the S&P 500 was utilities, up 9%, followed by communications services, up 4%. The worst-performing sector was consumer discretionary, down more than 2% and including large-cap companies like Amazon and Tesla. But Nvidia’s earnings results next week could reinvigorate a trade that still has the power to push the market higher, backed by investors buoyed by the transformative potential of AI. The $2.3 trillion company is the third-largest S&P 500 stock by market capitalization and has an expected volatility of about 8%, meaning the stock could move up and down a lot. in quarterly reports. In other words, the result could be a market-shaking event given the chipmaker’s sheer size and popularity. “Nvidia will be the non-boring stock in this recovery because when utilities lead and financials lead, they don’t have to,” said Jay Woods, chief global strategist at Freedom Capital Markets. are the headline makers.” . “Nvidia is a leading manufacturer so I can’t wait to see how the market reacts to that.” Mountain NVDA YTD Nvidia For investors, the results could help the major averages continue to move higher — or slow their gains. On Friday, the 30-stock Dow was on track for its fifth straight weekly gain, a streak not achieved since February. The S&P 500 and Nasdaq Composite are both on track to gain for the fourth consecutive week. Market Drivers By now, investors are used to Nvidia beating expectations in its earnings report, by a huge margin. In fact, Piper Sandler’s Harsh Kumar, who has a buy rating on the stock, said he expects the chipmaker to beat revenue expectations by $1.5 billion to $2 billion in its upcoming report. He noted that over the past three quarters, Nvidia’s top line has averaged $1.9 billion. Kumar hopes that means the market could make progress if chipmakers meet or slightly exceed expectations. However, for AI investors, what matters most is what CEO Jensen Huang can share about future demand for Nvidia’s products. Kumar said that although the company’s latest generation of AI graphics processors called Blackwell are expected to be “incredibly better” than its competitors, investors are looking for new solutions. Indications are that demand continues to remain strong and orders remain on track. The strong guidance has the potential to not only elevate Nvidia but also boost the broader AI trade as recent software names have become increasingly outdated. “It’s the new catalyst” for that theme, said Zachary Hill of Horizon Investments. But investors may be less forgiving of disappointments from the market favorite over the past year. Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, said he could see broader markets selling off by “more than 1%” — realistically 1.5%, 2% or “something worse” – if Nvidia’s message scared investors, it was largely because of the chipmaker’s place in the popular imagination “Nvidia really epitomizes the AI revolution, for all the excitement people have about the possibilities of increased productivity and a new era of computing through artificial intelligence,” Zaccarelli said. “So if they can continue to exceed expectations, I think that will have a huge effect,” Zaccarelli added: “Conversely, if they deliver bad forecasts or disappointing earnings results, I “I think much of the positive sentiment we had this week could reverse.” Next week’s earnings report is more upbeat. Investors expect the long-term story to remain intact, and many predict that any share price decline will be quickly bought back Nvidia is up nearly 87% this year but is only gaining more 2% this quarter. “Regardless of how they perform, I think over the long term, this will be in everyone’s portfolio to some extent,” said Freedom Capital Markets’ Woods. “It’s the top AI play.” Maintaining all-time highs for Nvidia’s earnings will also be an important catalyst at a time when technicians are watching to see if the stock can maintain its levels. record they achieved this week or not. Fairlead Strategies’ Katie Stockton said she is watching to see if the S&P 500 can hold above the 5,260 resistance level through next Friday, a confirmation of a breakout that would be bullish for the stock. But the technician is also concerned that there could be further weakness ahead, citing mixed signals in momentum indicators. “Of course, the short-term measures, in terms of momentum, score higher, but the medium-term measures mostly score lower,” Stockton said. “So we still feel the market is vulnerable to another pullback during the correction period that began in April.” “So we’re watching and waiting to see how it plays out,” Stockton added. Week Ahead Calendar All Times ET. Monday, May 20 No notable events. Earnings: Palo Alto Networks Tuesday, May 21 No notable events. Earnings: AutoZone, Lowe’s Companies Wednesday, May 22, 10 a.m. Existing Home Sales (April) 2 p.m. FOMC Minutes Earnings: Nvidia, TJX Cos., Analog Devices, Target, Raymond James Thursday, May 23, 8 a.m. Building Permits 8:30 a.m. Chicago Fed National Activity Index 8:30 a.m. Continuing Jobless Claims 8:30 a.m. Initial Claims 9:45 a.m. PMI Total Prelims 9:45 a.m. S&P PMI Manufacturing Prelims 9:45 a.m. S&P Services Prelims 10 a.m. New Home Sales 11 a.m. Kansas City Fed Manufacturing Index Earnings: Intuit , Ralph Lauren Friday, May 24, 8:30 a.m. Standing orders – CNBC’s Nick Wells contributed to this report.
