Louis Krauskopf
NEW YORK (Reuters) – Nvidia’s results next week could set the U.S. stock market’s next direction as investors shift focus to the technology sector and artificial intelligence trades after the election bull run stalls.
Over the past two years, Nvidia’s stock has risen nearly 800%, driven by its flagship AI business, propelling the semiconductor company to the top spot in the world by market capitalization.
While that weight will give Nvidia a big impact on market benchmarks like the S&P 500 and Nasdaq 100, the Nov. 20 results will also be a gauge of market interest in tech stocks, AI trading, and sentiment toward stocks in general. investors said. .
The benchmark S&P 500 has rebounded from record highs following the Nov. 5 U.S. presidential election that gave President Donald Trump and his Republican allies control of Congress.
Garrett Melson, portfolio strategist at Natixis Investment Managers, said the market is “looking for direction right now.” “If those results are pretty strong, then you know there’s still momentum behind that investment or trade, and I think that helps expand your risk appetite.”
Nvidia’s dominant position in AI has sent its stock price soaring and led to impressive financial performance. For the company’s fiscal third quarter, sales are expected to jump more than 80% to $33 billion, with net income expected to be $18.4 billion, according to LSEG data.
But after a spike in past analyst earnings estimates last year, NVIDIA’s surprise was more modest, with the company topping its most recently reported quarter by 6%, LSEG data showed.
“It’s becoming increasingly difficult to beat those expectations,” said Mark Ruschini, chief investment strategist at Janney Montgomery Scott.
Nvidia’s results cap a mixed third-quarter earnings season for U.S. companies. S&P 500 earnings are trending up 8.8% year-over-year, with 76% of companies beating expectations, compared with an average of 79% over the past four quarters, according to LSEG IBES data.
As in recent quarters, performance has been weighed down by Nvidia and a small group of other mega-cap technology companies and related companies. Tajinder Dhillon, senior research analyst at LSEG, said the third-quarter profits of the so-called “Magnificent Seven” companies, which also include Apple and Microsoft, rose 4.3% compared with the 4.3% increase for the other 493 companies included in the index. The company is forecasting a 30% increase in profit. .
“It’s precisely Mag 7, led by Nvidia, that has done the hard work of addressing the revenue growth that has supported the stock’s rise,” Ruschini said.
According to LSEG Datastream, NVIDIA’s financial results could be important in supporting the overall market’s high valuation, as the S&P 500’s expected price/earnings ratio exceeds 22 times, approaching the highest level in more than three years. There is sex.
The benchmark index is up 23% this year. Mr. Trump’s victory initially sparked a big rally in stock prices, fueled by optimism about his policies of lower taxes and deregulation.
But stocks tumbled this week as the market continued to digest the effects of the election.
Investors will continue to focus on Trump’s transition plans, including the selection of key Cabinet members, after some of his first appointments caused weakness in market sectors such as pharmaceutical and defense stocks. Dew.
Stocks also fell after Federal Reserve Chairman Jerome Powell said Thursday that the central bank is in no hurry to cut interest rates and that monetary policy will remain at the forefront of markets in the coming weeks.
“Given that the stock market is so expensive, the fact that the Fed is suggesting it will be less accommodative than it had indicated before the election is likely to create at least some headwinds in the coming days and weeks. ” Matthew Maley, chief market strategist at Miller Tabak, said in a note Friday.
(Reporting by Louis Krauskopf; Editing by Richard Chan)
