Nvidia's earnings on Wednesday: The fateful moment of the entire stock market rally
Tech giant Nvidia will report its first-quarter results on Wednesday, May 20, after the market closes. It's an evening that could either inject new bullish sentiment into the market or trigger a broad-based correction across the market.
The bar has been set high.
Nvidia has conditioned investors to expect not just the beating of forecasts, but their crushing. This has created a market phenomenon called "whisper numbers" - unofficial expectations that are significantly higher than the official consensus estimates and that the stock must meet in order to continue its rally.
This also places significant “sell the news” risk on the company. If Nvidia’s results are merely “good” or in line with expectations, they may disappoint the market and investors. Since the stock is currently trading at its all-time highs (ATH), investors may take the opportunity to sell and take profits. This would be immediately reflected in the broader index level and the semiconductor sector.
Nvidia / USD, 1 year-chart
Nvidia / USD, 5 -year chart
Three key metrics: What to look for in the report?
Investors should pay particular attention to these three issues when the numbers are released on Wednesday after the close of US stock markets (11:00 p.m. Finnish time):
● Data Center revenue: This is Nvidia's most important segment and growth driver, which includes sales of AI chips (such as the H100 and H200, as well as the newer Blackwell architecture. Investors want to see tech giants like Microsoft, Meta, and Google continue to invest in data centers at an ever-increasing pace.
● Gross Margins: Nvidia's gross margin has been around 70 percent. Investors are closely watching to see if the intensifying competition from companies like AMD, Intel or production costs are pushing margins down.
● Future guidance: The market always prices the future. Therefore, the company's comments on future demand and official guidance for the rest of the year are critical factors.
Risk and opportunity for indices
Nvidia's direct impact on the market is extraordinary. As one of the world's most valuable companies, a few percent move in one direction or the other directly moves the S&P 500 and NASDAQ-100 indexes.
If Nvidia disappoints, it will not only drag down other chip companies (such as AMD, ASML, and TSMC), but also hardware and software manufacturers whose growth relies on building AI infrastructure. On the other hand, if CEO Jensen Huang delivers numbers that exceed expectations and says that demand will exceed supply well into next year, it could spark a whole new buying rally in the stock market.
S&P 500 / USD, 1-year chart
S&P 500 / USD, 5-year chart
NASDAQ / USD, 1-year chart
NASDAQ / USD, 5-year chart
Summary
Wednesday night will be the absolute highlight of the week, and it could set the tone for the rest of the week – and possibly longer. Although the technical outlook is positive, the fundamentals now need to provide support. Be sure to mark your calendars for May 20, when the true state and strength of the AI boom will be revealed.
Indicators shown on the graphs:
● SMA200: 200-day moving average, red.
● SMA50: 50-day moving average, blue.
● EMA25: 25-day exponential moving average, yellow.
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