NVIDIA's Quarterly Results to Shape Market Trajectory

The last of the Magnificent Seven reporting this week will likely determine market direction as traders await signs of whether AI can continue propelling markets higher.

To Make or Break the Market

Nvidia's quarterly earnings report is scheduled after market close on Tuesday. It is undoubtedly one of the most anticipated earnings this week by traders seeking clarity on whether artificial intelligence (AI) can continue propelling markets higher. The company's stock has climbed 46% year-to-date (YTD), following a substantial 240% increase last year. As Nvidia accounts for over a quarter of the S&P 500's YTD gains, which has reached new highs, the market expects its results to provide insight into AI stocks. In particular, investors will observe if Nvidia follows peers in the sector that reported solid quarterly earnings and exerted marked price moves after reporting.

Analyst consensus forecasts an over 400% rise in earnings per share (EPS) to $4.51 for the quarter, representing a significant drop following last November's over 1,200% year-over-year (YOY) growth. Revenue is expected to surge over 300% to $20.2 billion. NVIDIA's lofty share valuation of 96.2x price-to-earnings (P/E) ratio relies considerably on maintaining earnings expansion matching high valuations. How long this can continue remains uncertain; the upcoming report may offer clues.

What to Look Out For

The attention will likely be on advancements in AI. Yet, the company's growth is significantly hampered by a shortage of supplies, a problem that might draw considerable interest from those closely monitoring Nvdia's financial health. The ability of partners to meet demand—through supplying Nvidia with essential parts and accumulating a reserve of AI-capable services for clientele—is seen as a vital indicator of Nvidia's potential for sustained expansion.

The company's previous earnings growth has already been priced in the stock's notable appreciation, indicating that market reaction will likely hinge on Nvidia's guidance. Technology firms have experienced volatile results despite strong profits due to outlooks failing to meet investor expectations. And Nvidia faces multiple moving parts in the upcoming earnings. It must navigate the impact of US trade restrictions on China, evaluate the demand from governmental bodies, and thoroughly assess the market size. In addition, how much the company will invest in increasing its capacities and research efforts is another important factor to consider. Essentially, the reaction might centre on Nvidia's ability to maintain its growth trajectory and the pace at which it can do so.

NVDA Ranging Ahead of Earnings

After setting a new record high of 746, Nvda's share price retreated back to 696. However, the upward trajectory since then suggests the stock may trade within a narrow range until a decisive breakout occurs. Should the recent floor hold firm and resistance at the new high weaken, the next leg higher could take NVDA to around 800. Alternatively, 663 and the lower swing at 634 may be threatened if the floor fails to offer solid support.

Source: SpreadEx / NVDIA

Key Takeaways

NVIDIA is scheduled to report its quarterly earnings after the US market close on Tuesday, providing insight into the AI sector and whether it can continue driving markets higher. Analysts' consensus forecast significant increases in both earnings and revenue for the quarter. However, NVIDIA faces challenges from supply shortages and trade restrictions that could impact its ability to meet demand. The market will focus on the company's guidance and any clues around maintaining its strong growth trajectory. Its capacity to invest in increasing production and research will also be key areas of interest.​