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Results for AI bellwether Nvidia ( NVDA ) set for Wednesday

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Stocks rebound broadly on Fri after dovish comments from

Fed's

Powell

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S&P 500 up 10% on the year, near record highs

By Lewis Krauskopf

NEW YORK, Aug 22 (Reuters) - A wobble in U.S. technology

shares has raised the stakes for Nvidia Corp's ( NVDA )

quarterly results on Wednesday, with earnings from the

semiconductor giant posing a crucial test for the scorching AI

trade.

The heavyweight tech sector slumped 1.6% on the week

after a huge run for the group, dragging on key indexes. The

sector's weekly decline moderated on Friday as stocks broadly

rallied after comments from Federal Reserve Chair Jerome Powell

appeared to pave the way for imminent interest rate cuts.

Fueled by its dominant artificial intelligence (AI) products,

Nvidia's ( NVDA ) massive share price gains have buoyed both the tech

sector and the overall market in recent years. Last month,

Nvidia ( NVDA ) became the first company to top $4 trillion in market

value.

Investors are now more "on edge" heading into Nvidia's ( NVDA )

results, said Matthew Maley, chief market strategist at Miller

Tabak.

"When the group goes down and the most important stock in

the group reports earnings, that is going to have a bigger

impact than usual," Maley said.

Nvidia's ( NVDA ) stock has climbed more than 30% so far in 2025,

pushing its gain to over 1,400% since October 2022. The

California-based company has epitomized the broader AI

excitement that has driven up shares of a raft of tech companies

and others involved in AI infrastructure such as power

generation and cooling systems.

"Nvidia ( NVDA ) is almost looked at as a proxy to what is happening

in artificial intelligence," said Matt Orton, chief market

strategist at Raymond James Investment Management. "There's

definitely a read-through that happens to the broader AI trade,

which has really been the main driver of the S&P 500's return

this year."

Analysts said possible reasons for recent tech stock weakness

include cautionary AI industry developments, including comments

from OpenAI CEO Sam Altman that investors may be getting

overexcited about AI. Also, a study from researchers at the

Massachusetts Institute of Technology cast doubt on returns from

AI investments.

Nvidia's ( NVDA ) results will close out a second-quarter U.S.

corporate earnings season that has largely surpassed

expectations and helped support equities. S&P 500 company

earnings are on track to have climbed 12.9% from the

year-earlier period, up from an expected 5.8% rise on July 1,

according to LSEG IBES.

Goldman Sachs ( GS ) strategists pointed to particular earnings

strength so far for the "Magnificent Seven" -- the group of

megacap companies that includes Nvidia ( NVDA ) as well as Apple ( AAPL )

and Microsoft ( MSFT ). Including estimates for Nvidia ( NVDA ), the

Magnificent 7 are on track to have increased earnings by 26%

compared with 7% for the remaining 493 stocks in the index, the

Goldman strategists said in a note.

Nvidia ( NVDA ) is expected to post a 48% rise in earnings per share

on revenue of $45.9 billion for its second fiscal quarter,

according to LSEG data.

Megacap tech companies focusing on AI have recently

increased their estimates for capital spending, which should be

favorable for Nvidia ( NVDA ), said Paul Roach, portfolio manager at

Allspring Global Investments.

Nvidia's ( NVDA ) "commentary on the demand side... should be more

bullish just because their largest customers have all kind of

upped their capex guidance over the last few quarters," Roach

said, adding that demand for Nvidia's ( NVDA ) products is also

broadening beyond the largest tech companies

ECONOMIC DATA

Investors will also focus on U.S. economic data in the

coming week, including on consumer sentiment and inflation.

Despite the latest tech declines, the S&P 500 eked out a

gain on the week and is up about 10% this year, around

record-high levels. The Dow Jones Industrial Average

notched a record high close on Friday.

As tech shares fell this week, some investors rotated into

other areas of the market that have not been as strong in recent

weeks, such as healthcare and consumer staples

.

But major equity indexes will be hard-pressed to keep moving

higher if tech falters, given its heavy presence in those

indexes, Maley said. Tech is by far the largest of the S&P 500's

11 sectors, with a 33% weight. Nvidia ( NVDA ) alone has a nearly 8%

weight in the index.

"If these tech stocks continue to fall, that means the

indexes will continue to fall," Maley said. "No way around it."