Nvidia set the market alight last quarter. Can it repeat the trick?

By CNN Newsource

Published August 23, 2023 4:42 AM

Analysis by Krystal Hur, CNN

(CNN) — Artificial intelligence darling Nvidia’s upcoming earnings report could be a boost or a drag on a market already mired in the summer doldrums.

Analysts expect the chipmaker to post second-quarter profit of $2.09 a share and revenue of about $11.2 billion after the closing bell on Wednesday, according to Refinitiv.

What’s happening? Nvidia shares have been on a tear this year as the popularity of artificial intelligence has surged. The company produces chips that power generative AI, the type of artificial intelligence capable of creating new content including text, images and other media — and which forms the foundation of ChatGPT and several other buzzy AI services.

When Nvidia reported first-quarter results, its earnings and sales shattered expectations. CEO Jensen Huang said during the post-earnings conference call in May that the company is ramping up its supply to meet “surging demand.”

An upbeat earnings report from Nvidia could help lift the broader market, says Phillip Toews, chief executive officer at Toews Asset Management.

That’s because Nvidia is the poster child of the AI enthusiasm that’s helped power stocks into a bull market, even as the US Federal Reserve has continued to hike interest rates in its battle against inflation.

Shares of Nvidia have surged an eye-popping 212% this year, leading the gains in the “Magnificent Seven” stocks — which also include Alphabet, Amazon, Apple, Meta, Microsoft and Tesla. Nvidia reached a $1 trillion market cap in May, becoming the ninth company to achieve that milestone.

Tech stocks rose on Monday, indicating optimism among investors about Nvidia’s earnings. The tech-heavy Nasdaq Composite index on Monday gained 1.6%, marking its biggest one-day jump this month and stalling the recent sell-off in tech stocks.

“Expectations for the high values of tech to run out of gas after the blistering first half, and the rest of the market to see a partial catchup … has yet to occur,” wrote Louis Navellier, chairman of Navellier & Associates, in a Tuesday note.

Can the tech rally last? Tech stocks faltered somewhat on Tuesday, as weak retail earnings and elevated Treasury yields put pressure on stocks. Investors tend to favor bonds when yields are attractively high.

Still, the Nasdaq Composite was the only major index to finish Tuesday’s trading session positive, albeit by a small margin. Nvidia shares have risen roughly 5% so far this week, Tesla 8%, Meta 2% and Apple 2%.

“We expect a bullish outlook from Nvidia that should be the fuel in the engine to continue this tech rally into the rest of the year,” wrote Dan Ives, tech analyst at Wedbush Securities, in a note on Monday.

But any weakness in Nvidia’s earnings could send its shares and other tech names lower.

Nvidia’s quarterly results aren’t the only risk to markets this week.

Federal Reserve Chair Jerome Powell will deliver a speech at the Kansas City Fed’s annual economic symposium in Jackson Hole, Wyoming, on Friday. Last year, his reiteration of the Fed’s commitment to tamping down inflation sent the Dow Jones Industrial Average index plummeting 1,000 points.

US home prices rise after 5 months of declines

US home buyers have a new challenge in addition to mortgage rates above 7%, reports my colleague Anna Bahney.

Prices are rising again, reversing five months of year-over-year declines, according to a National Association of Realtors report released Tuesday.

The median existing home price was $406,700 last month, up 1.9% from a year ago. It was the highest price for the month of July on record. Prices rose in the Northeast, Midwest and South but were unchanged in the West, the NAR report found.

Prices were pushed up by the stubbornly low inventory of homes on the market — just 1.11 million existing homes were available to buy at the end of July, down 14.6% from a year ago. It was the lowest number of homes for sale on record for the month of July, which is typically one of the busiest months for buying and selling in the year.

Homeowners are refusing to sell and are hunkering down with their ultra-low mortgage rates that are at least half the current rates, which are at their highest level in 21 years.

Meta’s Threads is finally available on desktop

Threads users, rejoice.

The app rolled out its highly anticipated web version Tuesday, reports my colleague Clare Duffy.

The update — perhaps the most requested by users since Threads’ mobile-only launch last month — puts the new platform one step closer to recreating the functions offered by rival X, the platform formerly known as Twitter, and could help reignite user growth following a sluggish period.

Parent company Meta Platforms says Threads users will soon be able to log in, post, view and interact with other posts via a browser on a desktop computer, as the web version rolls out to users in the coming days.

The company says it plans to add more desktop features. In an early access test of some of the web-based features, CNN was able to post on the platform but could not yet scroll the home feed.