Investors are getting quite antsy ahead of the release of NVIDIA’s earnings after tonight’s close. The chipmaking giant has made extraordinary gains due to the excitement over its role in the future of generative AI. The stock price has almost quadrupled since January 2023 and last week the company briefly became the third largest US corporation as measured by market capitalisation. But the stock fell sharply yesterday in a move which saw NVIDIA drop back to fifth place, behind Microsoft, Apple, Alphabet and Amazon. Over the past fourteen months, NVIDIA has repeatedly smashed past quarterly expectations for its revenues and earnings. It has also provided a succession of strong statements for forward guidance. Consequently, the concern now is that the company may finally fail to beat market expectations. It certainly has some high hurdles to jump. If it does disappoint, it may also trigger a sell-off in other tech companies which have benefited from the excitement over generative AI. Conversely, another strong set of results could see investors rush back in to reestablish long side exposure.
There’s no doubt that equity prices are quite frothy at current levels, particularly if one considers recent speculation that the US Federal Reserve’s next move in interest rates could be a hike, rather than a series of cuts. This follows comments last week from former Treasury Secretary Larry Summers, after month-on-month upticks in CPI and PPI. But that in itself isn’t enough to dampen the current bullish sentiment, driven by the robustness of the US economy, and historically low unemployment. US equities have come a very long way since the end of October without any significant pullback. Yet sentiment can turn in an instant. Could NVIDIA prove to be the catalyst?
There’s no doubt that equity prices are quite frothy at current levels, particularly if one considers recent speculation that the US Federal Reserve’s next move in interest rates could be a hike, rather than a series of cuts. This follows comments last week from former Treasury Secretary Larry Summers, after month-on-month upticks in CPI and PPI. But that in itself isn’t enough to dampen the current bullish sentiment, driven by the robustness of the US economy, and historically low unemployment. US equities have come a very long way since the end of October without any significant pullback. Yet sentiment can turn in an instant. Could NVIDIA prove to be the catalyst?