On Wednesday, earnings from semiconductor leader Nvidia (NVDA.O) are poised to challenge the ongoing rally in the U.S. stock market, which has seen indices reach all-time highs this year. Nvidia’s stock has surged 90% this year, positioning it as the third largest U.S. company by market capitalization, behind only Microsoft (MSFT.O) and Apple (AAPL.O).
Nvidia’s pivotal role in the artificial intelligence sector, with its chips considered the industry standard, has made its financial performance a key indicator for the AI industry’s growth. This growth has fueled investor enthusiasm and contributed significantly to the bullish momentum in U.S. stocks.
Moreover, Nvidia’s increasing presence in indexes and exchange-traded funds has amplified its impact on the broader market. It currently represents over 5% of the S&P 500 (.SPX), 6.5% of the Nasdaq 100 (.NDX), and 20% of the VanEck Semiconductor ETF (SMH.O).
“If they do well… a lot of stocks are likely to follow,” observed Jay Woods, chief global strategist at Freedom Capital Markets. “It’s uncommon for one stock to have such a dramatic effect on the overall market, but Nvidia has reached that level.”
“What Nvidia reports will significantly influence how the major investment theme of AI is perceived,” said Chuck Carlson, CEO at Horizon Investment Services. “AI is impacting every area, and at the heart of it all is Nvidia.”
The forthcoming earnings report from Nvidia has the potential to affect the stock performance of various AI-related companies, particularly those that have recently seen significant volatility after substantial gains.
