Nvidia earnings now rival US jobs report for impact on markets

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Nvidia’s earnings have become as important for US markets as key economic data, according to analysts, as the chipmaker prepares to announce quarterly results that will allow investors to gauge the health of the artificial intelligence boom.

The benchmark S&P 500 was 1 per cent lower and the tech-heavy Nasdaq Composite had shed 1.6 per cent on Wednesday, ahead of the company’s second-quarter results due after the market’s close. Nvidia was trading down 2.7 per cent.

Nvidia’s share price has surged more than 150 per cent this year, propelled by a boom in spending on AI, which its chips power, and has roughly a $3.1tn market value, surpassed only by Apple. It accounts for about 6 per cent of the S&P 500 and more than a quarter of the benchmark’s 18 per cent gains this year.

Nvidia has become “one of the most important events on the macro calendar”, with recent results leading to market reactions “that rival the sort of moves taking place after a surprise US jobs report or consumer prices index release”, said analysts at Deutsche Bank.

The bank noted that the S&P rose 2.1 per cent the day after Nvidia’s results in February, its second-best daily performance of the year. The S&P 500 closed marginally higher on Tuesday, close to its record high.

One asset manager said that he could not recall a set of corporate earnings that had been more “keenly awaited”. “It’s hard to imagine the share price not reacting strongly later this evening,” he said.

“We believe this is the most important earnings report for the stock market this year and potentially in years,” said Dan Ives, analyst at Wedbush, in a note to clients on Wednesday.

Global markets were jolted at the start of the month after weaker-than-expected US jobs data triggered sharp falls for US stock markets.

Morningstar equity strategist Michael Field said Nvidia’s earnings could send shockwaves through the market. “We’re in a precarious period. We had the sell-off in August and have pretty much recovered since . . . [but the] Vix is still elevated,” he said.

The company’s results will have implications for other tech stocks, given that Nvidia has become the bellwether of an AI trend that has pushed up the market capitalisation of US giants including Apple and Microsoft.

JPMorgan analyst Nikolaos Panigirtzoglou said: “We detect a picture of retail investor tech bullishness, while hedge funds and active equity mutual funds appear more cautious on US tech.”

Ahead of Nvidia’s report, shares in one of its biggest distributors, Super Micro Computer, fell as much as 24 per cent on Wednesday after the company stated it would delay its latest annual report. The move followed criticism from prominent short seller Hindenburg Research on Tuesday. 

“Additional time is needed for [Super Micro’s] management to complete its assessment of the design and operating effectiveness of its internal controls over financial reporting,” Super Micro said.

The company has not responded to Hindenburg’s attack, which claimed Super Micro faced “significant accounting, governance and compliance issues and offers an inferior product and service now being eroded away by more credible competition”.

When Nvidia reveals its latest numbers, analysts expect it to report $28.7bn in revenue for the quarter, which would represent a doubling year on year.

Yet the US chipmaker is facing questions around the extent of reported delays to its next-generation Blackwell chips, while investors are also cautious customers could slow their spending on AI-related chips.

In May, Nvidia told investors to expect significant revenue from Blackwell, which promises to be twice as powerful for training new AI models as its current generation of chips.

Earlier this month, it emerged that production challenges were likely to delay shipments of some variants of the Blackwell line-up by as much as three months.

Nvidia said at the time that Blackwell was “on track to ramp” up to mass production in the second half of 2024, while demand for its predecessor, Hopper, remained strong.

Investors had so far taken the company at its word, analysts at Morgan Stanley said in a note on Monday, and had “largely shrugged off concerns” about delays.

“The only caveat is that investor expectations are climbing,” the analysts added.

Additional reporting by Tim Bradshaw and Jennifer Hughes