Nvidia results checklist

It is rare that a single stock dominates the global financial space, however, tonight’s earnings report from Nvidia seems like a pivotal moment for global financial markets. A stunning earnings report could reenergize the AI trade and the entire US stock market rally, however, a disappointing report could trigger risk off sentiment. Nvidia stock tends to experience huge moves around earnings releases. The implied 1-day move after an earnings report, based on the past 8 quarters, is 7.75% in both directions, which is the equivalent of $300bn in market cap. After the last Nvidia earnings report in August, the stock price fell 15% over a few days.

The lead up to this earnings report has seen some wild swings in Nvidia’s share price. It initially lost steam earlier this week, before rallying nearly 5% on Tuesday, and is close to a record high. Unlike past quarters, this earnings season is different: there is an $8bn range in analyst expectations for revenues for last quarter. The lack of a unified narrative is triggering swings in the share price in the lead up to this report, and it could also trigger excess volatility later this evening and on Thursday, once we get the data.

While the headline number is expected to be mammoth, the driver of Nvidia’s share price going forward will come from its forward guidance and its outlook for its latest products. The questions that the market needs answers to include:

• Forecasts for Blackwell chip sales. There is some concern that customers may delay their purchases of this chip and wait for newer releases. The Blackwell chip has had a short history of problems including a re-design and a delay to production. Since each chip is expected to be $50k, up from the current average price of $35k, some customers may wait for a more developed chip to emerge.

• Energy: Investors want to know exactly what efficiencies can be achieved with the new chip, and also how much power will be needed for Nvidia’s GPUs to work effectively. Greater energy demands could prove a problem for their customers and may impact demand.

• On the positive side, Nvidia’s biggest customers, including Meta, Microsoft and Alphabet have all announced major capex spend plans for the coming quarters, and a large portion of that will likely be directed to Nvidia. This may ensure a decent pipeline of demand for its products.

• High expectations: Nvidia have a history of beating estimates and sales have beaten estimates by an average of $1.8bn per quarter since 2023. This is a high bar and a conservative estimate from Nvidia about demand for Blackwell chips may disappoint the market.

How will Nvidia’s results impact the broader market?

Nvidia has a market cap that is bigger than the entire FTSE 100 and the German Dax. Thus, it’s results could reverberate around financial markets in the coming days. Other AI stocks could be impacted, including ASML, with the options market pricing in a potential for a 3% move on the back of Nvidia’s earnings. Also, the options market is positioned for a positive report, there is much higher volume levels for 1-month calls than for puts, which suggests that the market is not hedging in case of an earnings disappointment. This could exacerbate a downside move in Nvidia and the broader market, if earnings do not impress.

The main US indices are all lower by more than 1% in the last 5 trading sessions. Nvidia is a crucial part of all the main blue chip US indices after it was included in the Dow Jones recently. S&P 500 futures are predicting a slightly higher open today, however, we expect the market to remain quiet as we lead up to this big event.