On the 28th, it is expected to be a significant day for investors. Nvidia, a company that handles the semiconductors necessary for artificial intelligence (AI), will announce its quarterly earnings after the US market closes. Judging from the market’s current pricing, the stock price is forecasted to fluctuate approximately 10% in either direction following the announcement.
With a market capitalization at stake of about $310 billion (approximately ¥44.68 trillion), it is a critical moment that could create or erase value. The impact will strongly affect the overall market’s risk appetite.
Nvidia accounts for more than 6% of the market capitalization of the S&P 500 index by weight, and as Matt Stucky from Northwestern Mutual Wealth Management points out, it is “increasingly becoming a significant part that influences market trends and momentum.” He noted that if the earnings fall short of expectations or remain in line with them, “it is likely to create a risk-off environment,” while adding, “it will not necessarily drive the rotation.”
The market is tense precisely because of this point. Questions are arising about how long the move away from Nvidia and other large tech stocks known as the Magnificent Seven, like Microsoft and Apple, will continue towards other sectors. Many of the movements seen in the past few weeks were driven by expectations of an interest rate cut in the US. As long as economic growth remains sustainable, interest rate cuts will be a tailwind for highly leveraged companies.
“Suppose the Magnificent Seven weren’t in the market, what would the fundamentals have looked like since the beginning of the year?” Stucky questions.
“The performance since the start of the year would have been revised downwards by about 7%. The market as a whole has been flat. In other words, without Nvidia, the earnings guidance for S&P 500 companies would have lost some of its fundamental support,” he stated.
Matt Stucky
Source: Bloomberg
In fact, Nvidia has shown incredible strength in exceeding expectations over the past few years. As a result, investors are braced more for a $310 billion surge in stock price than for a decline.
Original title: Nvidia’s Expected $310 Billion Move Is Pivotal: Surveillance (excerpt)