This week presents two pivotal events for the stock market: Nvidia Corp.'s earnings report and Federal Reserve Chair Kevin Warsh's keynote at Jackson Hole. Analysts believe that while Warsh's advertised topic is payments innovation, any side notes or over-interpretation of his comments could still impact markets. However, the general sentiment is that Nvidia's performance will be more impactful than Warsh's remarks, especially as the market moves beyond solely trading on AI enthusiasm and grapples with bond market volatility.
Nvidia is scheduled to report its earnings after the close on Wednesday, August 26. The company had previously guided for revenue of $91.0 billion, plus or minus 2%, and a non-GAAP gross margin of approximately 75%. This compares to $46.74 billion in revenue and a 72.7% margin in the same quarter last year. Consensus estimates from Yahoo Finance, based on 42 analysts, project around $91.9 billion in revenue and $2.08 in adjusted earnings per share. Zacks also forecasts a cluster just above the guidance midpoint, with $91.71 billion in revenue and adjusted earnings near $2.08 per share. The guidance notably excludes revenue from China data center compute, and the prior year's quarter did not record H20 sales to China-based customers, though a $180 million inventory-reserve release did flatter that quarter's margin.
Despite beating its own revenue guidance in every recent quarter, the size of the beat has compressed, reaching 4.6% last quarter when $81.6 billion in revenue was reported against a $78.0 billion guidance midpoint. This suggests that the second-half outlook provided by Nvidia may carry more weight than the reported quarterly figures. Investors are keen to hear about gross margins, particularly in light of higher input costs, and CEO Jensen Huang's insights on future forward demand for AI. Nvidia's current market capitalization is approximately $5.2 trillion, making its results significant enough to move major indices like the Nasdaq 100 and S&P 500, potentially without reflecting broader market participation.
The broader market context includes a bond market that has been dictating direction, with the 30-year US Treasury yield hitting a 19-year high of 5.337% on August 18, leading to a decline in equities. While Treasury Secretary Scott Bessent announced an increase in long-term debt buybacks, the relief in yields was short-lived, with the 10-year closing at around 4.734% and the 30-year at approximately 5.273% on August 21. Nvidia's stock closed that Friday at $214.72, down 4.6% for the week, snapping a seven-day losing streak that wiped out over $400 billion in market value. The stock is currently rebounding ahead of its earnings report, leading the S&P 500 higher in terms of points and leading other chip stocks.
Looking ahead, market participants are also monitoring July core inflation data, due before Wednesday's market open. While Nvidia's stock has seen a significant rebound, its forward price-to-earnings ratio is more in line with the S&P 500, suggesting that while growth is expected to continue, the incredibly high year-over-year growth rates seen previously might slow down. This has led some investors to look for other exciting areas within the AI infrastructure trade, such as memory stocks, which have recently experienced high volatility.
