Do Nvidia Earnings Have You Worried? You’re Not Alone
4 minutes ago
As Nvidia earnings approach, anxiety has been running high.
The Cboe Volatility Index (VIX), known as Wall Street’s Fear Index, on Tuesday ended the day just below 25, near its highest level since May, when the market was cooling off from April’s tariff tantrum. The index has risen substantially in the past week after coasting along in the mid-teens throughout the second half of the year. (It was recently at around 23; a reading below 20 is generally considered calm.)
And CNN’s Fear & Greed Index, which tracks seven stock-market metrics to gauge the mood on Wall Street, yesterday fell to its lowest level since mid-April. Six of the seven index inputs were flashing “Extreme Fear” on Wednesday morning, with measures of momentum and market breadth having slumped in recent weeks.
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Recent anxiety has centered on AI, with some investors worrying that tech giants are overspending on technology with uncertain commercial prospects. Others argue AI will transform nearly every industry, justifying tech’s massive investments and high stock valuations.
The AI bubble debate has been playing out for some time, but it intensified this month. Forty-five percent of fund managers surveyed by Bank of America in November said an AI bubble was the biggest tail risk facing the market, up from 33% last month and just over 10% in September. More than half of those surveyed said AI was already in a bubble.
And bullish sentiment among retail investors last week fell to its lowest level since early September, according to the Association of American Individual Investors. Bearish sentiment jumped nearly 13 percentage points, the biggest week-over-week increase since February.
The stock market faces a critical test this afternoon when Nvidia (NVDA) reports earnings. The AI chip giant’s quarterly report has become a must-watch event on Wall Street this year, with its results often treated as a proxy for AI demand and a major driver of the AI rally.
AI bubble concerns and some high-profile divestments have dragged down Nvidia’s stock this month, but expectations are still high. Analysts predict the huge amounts of capital tech companies are pouring into data centers will underpin another strong quarter for the chipmaker.
Why Nvidia Earnings Matter So Much
24 minutes ago
A lot is at stake when the world’s most valuable public company reports earnings.
Nvidia’s latest quarterly financial update is being widely viewed as the biggest event of this earnings season. It could have wide-reaching implications for the AI trade and the broader stock market.
A strong showing from the chipmaker, which is viewed as an AI bellwether, could prove just what the market needs to revive confidence in the AI rally that boosted shares of Nvidia, its partners, and stocks across industries this year, pushing the major indexes to a series of record highs.
However, with expectations riding high and signs investors may be more difficult to impress amid persistent worries that elevated stock valuations have created an AI bubble, the stock could be primed for punishment if Nvidia’s results are anything less than stellar.
With the chipmaker facing a particularly challenging setup heading into Wednesday’s event, some investors are already bracing for enhanced volatility in its wake. Options pricing suggests traders see shares swinging roughly 7% in either direction by the end of the week.
Nvidia’s outsized influence on major indexes—with a market capitalization of around $4.5 trillion as of Wednesday afternoon, the stock accounts for about 8% of the S&P 500—also means a big move in its stock would impact the market broadly. And if Nvidia’s shares soar or slump, those of its partners and others related to AI likely will too.
Even if you don’t hold Nvidia stock directly, a big share price move could affect you if you hold money in broad market index funds through brokerage accounts or tax-advantaged retirement accounts such as a 401(k) or IRA. Options pricing indicates traders expect the S&P 500 could move close to 2% in either direction by the end of the week, affecting a wide swath of investors and savers.
In recent quarters, the AI chipmaker’s quarterly report has tended to be a sell-the-news event, with the stock finishing the week of its earning lower than its levels heading into the event in three of the last four quarters, despite strong results. However, Nvidia’s stock has typically picked up in the months that followed.
Most Wall Street analysts believe the stock has room to rise.