Nvidia's Upcoming Earnings Report: A Beacon of Hope for the U.S. Stock Market?

In recent weeks, the rally of U.S. stocks appeared to stumble, causing some disquiet among market watchers.

by Faruk Imamovic
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Nvidia's Upcoming Earnings Report: A Beacon of Hope for the U.S. Stock Market?
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In recent weeks, the rally of U.S. stocks appeared to stumble, causing some disquiet among market watchers. However, many optimistic investors are keenly setting their sights on the forthcoming earnings report from chip behemoth Nvidia (NVDA.O) this Wednesday.

They're hoping it might just be the elixir the market needs.

A Year of Strides for Nvidia

2023 has been a remarkable year for Nvidia shares, which have tripled in value. This impressive surge epitomizes the renewed vigor in megacap stocks, as well as the burgeoning enthusiasm for the vast business potentials of artificial intelligence (AI).

Together, these factors have steered the S&P 500 (.SPX) to a commendable 14% gain this year. Interestingly, Nvidia’s ascent isn't an isolated incident. It’s part of a broader movement among the elite "Magnificent Seven" group of megacap stocks.

This illustrious group includes other tech giants like Apple (AAPL.O) and Microsoft (MSFT.O). Collectively, their meteoric rise was instrumental in fueling approximately two-thirds of the S&P 500’s surge through July.

Anthony Saglimbene, chief market strategist at Ameriprise Financial, encapsulated the market's sentiment when he remarked, "Nvidia is at the center of two big themes the market is concerned about right now: Can Big Tech continue to lead the market, and is this AI story for real?" He added optimistically, "A little piece of good news in a stock that has been an important driver to the market could change the sentiment."

Earnings Report: A History of Surprises

Nvidia’s prior earnings report in May was nothing short of a shocker.

After releasing a stellar forecast, its stock catapulted by an eye-popping 24% in a single day. As if to ride the coattails of this success, the S&P 500 technology sector (.SPLRCT) subsequently rallied by 8% over the ensuing five days.

There's little wonder why some investors are already positioning themselves, hopeful for a repeat of this stellar performance. Further shining a spotlight on Nvidia's prominence, Goldman Sachs recently identified the company as one of 11 stocks poised to gain in the short term from the "AI revolution." According to a note released by Goldman analysts on Monday, an equal-weighted basket of these 11 stocks had already garnered a whopping 69% return in 2023, outstripping the 7% gain of the overall equal-weight S&P 500.

They noted, "Some of these stocks have already seen 2024 EPS estimates rise on the back of AI adoption, with NVDA representing a notable example."

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