Nvidia’s earnings out later today could make or break the AI trade

Wall Street’s AI rally faces a critical test this week as chipmaker Nvidia gears up to release its earnings later today, the Financial Times reports. Nvidia has become the poster child for the artificial intelligence boom that has reshaped markets since late 2022. Investors see the company’s performance — and its guidance — as a proxy for AI’s broader economic promise.

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Nvidia doesn’t just set the direction for AI and AI-related stocks, but the whole of the S&P 500. The company — now the most valuable publicly listed firm in the world with a market capitalization of USD 4.4 bn — has been the single biggest contributor to the S&P 500’s almost 10% YTD gain.

The company’s earnings could shape the direction of the market for weeks and even months to come, with traders bracing today for a high-volatility moment that could either reignite market momentum or trigger a pullback. “It’s not just a single stock,” said Pictet Asset Management Portfolio Manager Arun Sai. “It’s very unusual — people read through it to the economy as a whole.”

There’s concern that Nvidia shares are already overvalued, with shares of the chipmaker trading at 40x its expected earnings, according to FactSet. The tech-heavy Nasdaq 100 as a whole is trading at 28x forward earnings — well above its 25-year average of 22x.

Investor jitters intensified last week after a downbeat MIT reportand a warning from OpenAI CEO Sam Altman, who said “investors are over excited” about AI and that “some are likely to lose a lot of money.” The comments have cast a shadow over a sector many fear may be approaching a bubble territory — putting even more weight on Nvidia’s earnings. “They are the locomotive of this AI train,” said Citigroup’s Jon Zauderer. Futurum Group’s Daniel Newman added that “an unexpected surprise would be the ultimate and fastest way to send the market into a tailspin.”

But despite doubts, expectations are still sky-high, with the consensus being that Nvidia reports USD 46 bn in revenue for its July quarter — a 53% y-o-y increase. While that’s slower than the 69% growth it posted last quarter, and well off the 250%+ pace of early 2024, some analysts say the market will focus more on relative performance. “People will be more focused on growth relative to peers, and right now they are doing very well in that regard,” said Morgan Stanley’s Joseph Moore.

MARKETS THIS MORNING-

Asian markets are mostly in the green in early trading this morning, with the Hang Seng leading gains, up 0.3%. Japan’s Nikkei and the Shanghai Composite are also up, while the Kospi is flat.

THE CLOSING BELL: TADAWUL-

The TASI fell 0.2% yesterday on turnover of SAR 7.3 bn. The index is down 9.7% YTD.

In the green: SRMG (+8.3%), DWF (+7.2%) and Al Andalus (+6.2%).

In the red: HB (-5.6%), Acwa Power (-3.9%) and SIIG (-2.8%).

THE CLOSING BELL: NOMU-

The NomuC fell 0.1% yesterday on turnover of SAR 35.0 mn. The index is down 16.8% YTD.

In the green: Almodawat (+14.2%), Alashgal Almoysra (+14.2%) and Future Vision (+10.0%).

In the red: Albabtain Food (-7.2%), Alkuzama (-6.3%) and Multi Business (-6.3%).

CORPORATE ACTIONS-

Perfect Presentation for Commercial Services (2P) received the green light from the Capital Market Authority (CMA) to raise its capital to SAR 330 mn through a capitalization issue, CMA said in a statement yesterday. The SAR 30 mn capital increase will be paid off by 2P’s retained earnings, and is still pending shareholders’ approval and other regulatory requirements.

Al Kuzama trading Company’s board recommended a dividend payout of SAR 5.4 mn for 1H 2025 at SAR 1.40 apiece, it said in a disclosure to Tadawul yesterday. The distribution date is yet to be announced.