Investors zero in on Nvidia results as US tech stocks waver
FILE PHOTO: Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., August 19, 2025. REUTERS/Brendan McDermid/File Photo
NEW YORK :A wobble in U.S. technology shares has raised the stakes for Nvidia Corp's quarterly results on Wednesday, with earnings from the semiconductor giant posing a crucial test for the scorching AI trade.
The benchmark S&P 500 has pulled back this week from record levels, dragged lower by a roughly 3 per cent drop so far this week in the heavyweight tech sector after a huge run for the group.
Fueled by its dominant artificial intelligence (AI) products, Nvidia's massive share price gains have buoyed both the tech sector and the overall market in recent years. Last month, Nvidia became the first company to top $4 trillion in market value.
Investors are now more "on edge" heading into Nvidia's results, said Matthew Maley, chief market strategist at Miller Tabak.
"When the group goes down and the most important stock in the group reports earnings, that is going to have a bigger impact than usual," Maley said.
Nvidia's stock has climbed about 30 per cent so far in 2025, pushing its gain to over 1,400 per cent since October 2022. The California-based company has epitomized the broader AI excitement that has driven up shares of a raft of tech companies and others involved in AI infrastructure such as power generation and cooling systems.
"Nvidia is almost looked at as a proxy to what is happening in artificial intelligence," said Matt Orton, chief market strategist at Raymond James Investment Management. "There's definitely a read-through that happens to the broader AI trade, which has really been the main driver of the S&P 500's return this year."
Analysts said possible reasons for recent tech stock weakness include cautionary AI industry developments, including comments from OpenAI CEO Sam Altman that investors may be getting overexcited about AI.
Nvidia's results will close out a second-quarter U.S. corporate earnings season that has largely surpassed expectations and helped support equities. S&P 500 company earnings are on track to have climbed 12.9 per cent from the year-earlier period, up from an expected 5.8 per cent rise on July 1, according to LSEG IBES.
Goldman Sachs strategists pointed to particular earnings strength so far for the "Magnificent 7" - the group of megacap companies that includes Nvidia as well as Apple and Microsoft. Including estimates for Nvidia, the Magnificent 7 are on track to have increased earnings by 26 per cent compared with 7 per cent for the remaining 493 stocks in the index, the Goldman strategists said in a note.
Nvidia is expected to post a 48 per cent rise in earnings per share on revenue of $45.9 billion for its second fiscal quarter, according to LSEG data.
Megacap tech companies focusing on AI have recently increased their estimates for capital spending, which should be favorable for Nvidia, said Paul Roach, portfolio manager at Allspring Global Investments.
Nvidia's "commentary on the demand side... should be more bullish just because their largest customers have all kind of upped their capex guidance over the last few quarters," Roach said, adding that demand for Nvidia's products is also broadening beyond the largest tech companies
ECONOMIC DATA
Investors will also focus on U.S. economic data in the coming week, including on consumer sentiment and inflation.
Despite the latest week's tech-driven declines, the S&P 500 remains up over 8 per cent this year and stands less than 2 per cent below its record closing high.
As tech shares fell this week, some investors rotated into other areas of the market that have not been as strong in recent weeks, such as healthcare and consumer staples.
But major equity indexes will be hard-pressed to keep moving higher if tech falters, given its heavy presence in those indexes, Maley said. Tech is by far the largest of the S&P 500's 11 sectors, with a 33 per cent weight. Nvidia alone has a nearly 8 per cent weight in the index.
"If these tech stocks continue to fall, that means the indexes will continue to fall," Maley said. "No way around it."
