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Semiconductor company's quarterly report on Nov. 20

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Nvidia ( NVDA ) is AI poster child, largest firm by market value

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S&P 500 up 23% in 2024, but pulled back this week

By Lewis Krauskopf

NEW YORK, Nov 15 (Reuters) - Nvidia Corp's ( NVDA ) results in

the coming week could guide the U.S. stock market on its next

path, as investors turn their focus to the technology sector and

artificial intelligence trade after an election-fueled rally

stalled.

A nearly 800% run in shares of Nvidia ( NVDA ) over the past

two years, driven by its gold standard AI business, has

propelled the semiconductor company to the world's top spot by

market value.

That heft gives Nvidia ( NVDA ) huge sway in market benchmarks, such

as the S&P 500 and Nasdaq 100, while its results

on Nov. 20 will also be a gauge for the market's appetite for

tech stocks, the AI trade and sentiment for equities broadly,

investors said.

The benchmark S&P 500 has pulled back from record highs

following the Nov. 5 U.S. election that gave Donald Trump a

second term as president and his fellow Republicans control of

Congress.

Markets are "looking for direction right now," said Garrett

Melson, portfolio strategist at Natixis Investment Managers. "If

those results are pretty strong, that tells you that there's

still momentum behind that investment and that trade and I think

that helps to broaden out risk appetite."

Nvidia's ( NVDA ) dominant AI position has catapulted its share price

and led to an astonishing financial performance. For its fiscal

third quarter, the company is expected to post net income of

$18.4 billion as revenue jumped over 80% to $33 billion,

according to LSEG data.

However, after soaring past analysts' earnings estimates

last year, Nvidia's ( NVDA ) surprises have become more modest, with

earnings beating by 6% in its most recently reported quarter,

LSEG data showed.

"It's getting harder to hurdle those expectations," said

Mark Luschini, chief investment strategist at Janney Montgomery

Scott.

Nvidia's ( NVDA ) results cap a mixed third-quarter earnings season

for U.S. companies. S&P 500 earnings are on pace to have risen

8.8% from a year earlier, with 76% of companies beating

estimates compared to an average of 79% in the past four

quarters, according to LSEG IBES data.

As in recent quarters, results from Nvidia ( NVDA ) and a small group

of other megacap tech and related companies are carrying the

load. Those so-called Magnificent 7 companies, which also

include Apple ( AAPL ) and Microsoft ( MSFT ), are expected to

have increased earnings by 30% in the third quarter compared to

4.3% for the other 493 companies in the index, said Tajinder

Dhillon, senior research analyst at LSEG.

"It's really the Mag 7 led by Nvidia ( NVDA ) that's done the heavy

lifting to address the kind of earnings growth that has

supported the advance we've seen in stock prices," Luschini

said.

Nvidia's ( NVDA ) results may also be crucial to support the broader

market's lofty valuation, with the S&P 500's forward

price-to-earnings ratio above 22 times and near its highest

level in more than three years, according to LSEG Datastream.

The benchmark index is up 23% this year. Trump's victory

initially sparked broad stock gains on optimism about his agenda

of lower taxes and deregulation.

But stocks have pulled back this week as markets continue to

digest the implications from the election.

Investors will keep focus on Trump's transition plans,

including his picks for key cabinet roles, after some of his

initial appointees drove weakness in areas of the market such as

pharmaceutical and defense shares.

Stocks also fell after Federal Reserve Chair Jerome Powell

said on Thursday that the central bank does not need to rush to

lower interest rates, which will keep monetary policy at the

forefront for markets in coming weeks.

"Given that the stock market has become so expensive, the

fact that the Fed is signaling that they're not going to be as

accommodative as they had indicated before the election ... will

create at least some headwinds in the days and weeks ahead,"

Matthew Maley, chief market strategist at Miller Tabak, said in

a note on Friday.