Nvidia earnings have become crucial to the stock market - and this time even more so

By Britney Nguyen

AI stocks are under pressure as investors await a big rate-cut decision. Nvidia will look to steady the ship when it reports results on Wednesday afternoon.

Nvidia reports its fiscal third quarter earnings on Wednesday.

The direction of the artificial-intelligence trade perhaps hinges most on two individuals - and Wall Street is about to hear from one of them.

That would be Nvidia CEO Jensen Huang, who will address investors on the chip maker's highly anticipated earnings call Wednesday afternoon. Nvidia's (NVDA) earnings reports are always big events these days, but the coming release could be of even greater importance in light of heavy recent pressure on AI stocks.

Part of that relates to questions about the coming interest-rate decision from the Federal Reserve, which is helmed by Jerome Powell, the other key individual. If the Fed doesn't cut rates as swiftly as expected, that would make it harder for AI players to borrow money and finance their big ambitions, a trend that's weighed on not only more speculative AI stocks lately, but also better-capitalized plays.

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Companies that are focused on growth will "always be a little bit more sensitive toward those rate cuts for better and for worse," Ryan Lee, senior vice president of product and strategy at Direxion, told MarketWatch.

"It'll become harder for some of these hyperscalers to continue to borrow if rates stay elevated," he said, which is why investors have become so focused on the December Fed meeting and the path thereafter.

Sustained high interest rates mean hyperscalers would have to continue tapping into the cash flow of their core businesses, Lee said. And while debt financing is "not always a bad thing," if the market sees a continued need for debt and there are no rate cuts, the dynamic could weigh heavily on the hyperscale cloud stocks.

Lee attributed the recent selloff to "hawkish commentary" from the Fed ahead of expectations for a rate cut.

The AI trade is important for the broader market, Lee said, but results from Home Depot (HD) and other consumer-oriented companies could be garnering attention from the Fed.

Read: Home Depot blames the weather for disappointing sales, but that's not the only issue

Charlie Ripley, vice president of portfolio management at Allianz Investment Management, told MarketWatch that he thinks the market is expecting a terminal rate of 3% at some point in the next year. Now the focus is on how quickly that will come, hence some of the near-term volatility in the equity markets.

"When the market pulls back from the idea that a December cut is a sure thing to something that's more like a coin flip, that's going to impact equities in the near term," Ripley said, adding that lofty valuation levels are likely another reason investors are pulling back.

Powell's job at the Fed has been made more difficult by the recent government shutdown, which could hurt the quality of near-term economic data releases. That said, employment data is coming soon, but in the form of the September jobs report.

Investors will be looking to see whether Huang can steady the AI ship through some numbers of his own, such as upbeat results and future projections that suggest a healthy path forward for the AI ecosystem.

See more: Nvidia's stock has a strong setup ahead of next week's earnings, this analyst says

In Lee's view, the market will be hanging on to what Nvidia says about the next quarter. Huang said at the chip maker's GTC event in October that the company has visibility into more than $500 billion in revenue for its Blackwell and Rubin AI platforms through 2026, 30% of which has already been shipped.

Some analysts are looking well beyond that. Since Nvidia has already talked up 2026, that raises the stakes for 2027 and whether the company has visibility into robust trends going that far out.

Since Big Tech stocks have a major impact on the S&P 500 SPX, which is weighted by market capitalization, Nvidia's report will carry great importance in other ways as well. The pressure on "Magnificent Seven" stocks has led to "an outsized move in index prices," making Nvidia's earnings "key to a turnaround in the situation," Louis Navellier, founder of Navellier & Associates, said in a note to investors on Monday.

Nvidia's commentary could help soothe some of Wall Street's concerns over high valuations in the tech sector. Navellier, for his part, told MarketWatch he was "not worried about valuations" and expected the selloff to peter out "sooner rather than later."

And James Demmert, chief investment officer at Main Street Research, said in emailed comments that the "bubble is still inflating at a healthy pace with no signs of popping anytime soon." While valuations look expensive, the top players are trading "at discounts to earnings growth rates," Demmert said, "and overall AI market sentiment is mildly bullish and not euphoric."

After earnings results from hyperscalers, the market knows what AI capital expenditures look like. But Nvidia's report "will be a good temperature check" showing how the market leader is "really capturing that massive spend that we've seen these hyperscalers already report,'" Lee said.

Nvidia's earnings report represents "the last major broad catalyst" until the Federal Open Market Committee meets on Dec. 10, and thus will be a "good gauge" of how the market will behave through the post-Thanksgiving period into early December, according to Lee.

Meanwhile, he said any commentary by Huang on the depreciable life of Nvidia's chips will have ripple effects on the market. If Huang reinforces the idea that the depreciable life for the company's graphics processing units is longer, investors will likely be more comfortable about spending at broader hyperscalers.

-Britney Nguyen

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11-18-25 1632ET