Nvidia earnings could rescue a stalled-out stock market - if the AI chip maker breaks this trend

By Jamie Chisholm

Shares of Jensen Huang's company have struggled to make headway since the last earnings report

All eyes on Nvidia next week - and lots of pressure is on it, too.

It's been a week dominated by the bond market. The vacillation in Treasurys following the U.S. government's pledge to suppress longer-duration yields have rattled stock investors, too.

Next week, however, traders will have an opportunity refocus their attention on equity fundamentals when Nvidia (NVDA) releases its earnings and guidance after Wednesday's close.

The problem for bulls is that, to support the wider market, Nvidia may need to break a disappointing trend, according to the team at Bespoke Investment.

Before we explain that, here's the setup. There's been some chatter of late that the most important stock in the market right now is Micron Technology (MU), because the supply/demand imbalance for its memory chips acts as a thermometer for the broader technology sector, particularly the artificial-intelligence build-out.

But Nvidia remains the dominant force. Its earnings still serve as a barometer of the health of the AI ecosystem. Crucially, the company run by Jensen Huang sits at the center of much of the dealmaking that's shaping the AI boom.

And, with a capitalization of $5.26 trillion, Nvidia is the market's biggest company, carrying a 7.6% weighting in the S&P 500. The company is second in the list of hedge funds' "very important positions" (Amazon (AMZN) is first), according to Goldman Sachs.

With such sentiment and statistical heft, Nvidia's earnings can thus shape the broader market. Option traders are currently pricing in a move from now until the close of play next Friday of plus or minus 5.3% for Nvidia's stock, which is a top-to-bottom range of some $562 billion in market cap, based on MarketWatch calculations using FactSet data.

A positive for Nvidia investors is that shares haven't seen the kind of pre-earnings surge that could lead to profit taking even if it delivers good news. Indeed, since the company's last earnings report, the stock has gained only about 1%. Furthermore, it's relatively cheap by historical standards, with its next 12-month price-to earnings ratio at around 20, way down from a five-year average of 63, according to FactSet.

So, the set-up for Nvidia looks promising. But there's a problem, says Bespoke, in commentary posted late Thursday. The research and analytical boutique says Nvidia is "a triple-play king, meaning it consistently beats [earnings per share] and revenue estimates and raises guidance."

Indeed, Nvidia has completed 14 triple plays in 20 quarterly earnings reports over the past five years, according to Bespoke.

However, on the occasions of Nvidia's last three triple plays, shares have actually finished down on the day.

"For most companies, it's not common to report an earnings triple play, but for NVDA, it's now expected. Recent negative share-price reactions to the positive news are evidence of that," says Bespoke.

"In baseball, you can't do better than a triple play on defense," they add. Nvidia and Huang, though, are not playing baseball. It looks, according to the Bespoke team, "as if NVDA needs to do even more than simply reporting a triple play to get a post-earnings boost."

The markets

U.S. stock-indices SPX DJIA COMP are higher at the opening bell as Treasury yields BX:TMUBMUSD10Y inch up. The dollar index DXY is lower, as oil futures (CL.1) recover early losses and gold futures (GC00) trade around $4,632 an ounce.

 
Key asset performance                                                Last       5d      1m      YTD     1y 
S&P 500                                                              7707.98    -0.52%  2.79%   12.60%  20.52% 
Nasdaq Composite                                                     26,331.09  -0.97%  2.49%   13.29%  24.36% 
10-year Treasury                                                     4.676      2.90    -2.40   50.40   34.60 
Gold                                                                 4544.5     3.12%   12.15%  4.90%   34.31% 
Oil                                                                  86.39      6.38%   -6.46%  50.48%  36.09% 
Data: MarketWatch. Treasury yields change expressed in basis points 

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The buzz

Samsung Electronics (KR:005930) followed a move by its South Korean peer SK Hynix (KR:000660) (SKHY) and said it will buy back up to 110 trillion won in shares, or $78.88 billion.

Apple (AAPL) paid $17 billion in taxes to Ireland last year, representing 40% of its worldwide total, after a court ruling on back levies, according to the Financial Times.

Ross Stores shares (ROST) are jumping after the off-price retailer beat Wall Street revenue and profit expectations in the latest quarter.

BJ's Wholesale Club shares (BJ) are higher after the warehouse club chain posted higher second-quarter profit and revenue.

U.S. economic data due Friday include the flash manufacturing and services purchasing managers' indexes for August, released at 9:45 a.m. Eastern.

London's cabbies prepare to battle the robotaxis.

The chart

Ben Snider and his team at Goldman Sachs have just published their latest Hedge Fund Trend Monitor, which shows an important driver in the stock-market selloff that accelerated in July. Hedge funds were replete with technology plays going into the third quarter, they note. And the reason the Nasdaq underperformed last month was partly because hedge-fund "degrossing" - the selling of long positions and closure of short positions - "was particularly sharp," they say.

Top tickers

Here were the most active stock-market ticker symbols on MarketWatch as of 6 a.m. Eastern.

 
Ticker symbol  Security name 
SPCX           SpaceX 
NVDA           Nvidia 
TSLA           Tesla 
MRNA           Moderna 
MU             Micron Technology 
MSTR           Strategy 
AAPL           Apple 
SNDK           Sandisk 
META           Meta Platforms 
AMD            Advanced Micro Devices 

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-Jamie Chisholm

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(END) Dow Jones Newswires

08-21-26 0933ET