Global Highlights for This Week: Nvidia Earnings Take Center Stage, Fed’s Favorite Inflation Indicator to Be Released
Following Federal Reserve Chair Jerome Powell’s opening of the door to a potential rate cut as early as the September meeting, risk assets rebounded sharply last Friday. The Dow Jones Industrial Average hit its first record close of the year, while the S&P 500 ended a five-day losing streak.
Investors had anticipated a cautious stance from the central bank chief, but Powell’s speech instead emphasized the fragility of the labor market and hinted that the Fed might shift from its wait-and-see approach.
Looking ahead to this week, the spotlight is on the earnings report from AI chip manufacturing giant Nvidia—a report that not only impacts its own stock but is also seen as a litmus test for the entire AI investment thesis. A miss could trigger a sell-off in tech stocks.
According to LSEG data, Nvidia is expected to report $45.9 billion in revenue for the second quarter, with earnings per share up 48% year-over-year.
Riding its dominance in AI chips, Nvidia’s stock has soared in recent years, bolstering both the tech sector and the broader market. Last month, it became the first company globally to surpass a $4 trillion market cap.
Matthew Maley, chief market strategist at Miller Tabak, said: “When the entire tech sector has been shaky lately, the earnings of AI bellwethers will be under a microscope, and the ripple effects will be much larger than usual.”
Maley warned that, given the tech sector’s weight in the broader market, a continued decline in tech stocks could hinder the overall rally in U.S. equities.
Matt Orton, a strategist at Raymond James, noted that Nvidia has become synonymous with the AI boom, with its performance quickly influencing the entire AI supply chain—itself a key driver of the S&P 500’s gains this year.
Analysts attribute the recent weakness in tech stocks to cautious sentiment about AI’s future. For instance, OpenAI CEO Sam Altman warned that investors might be overly excited about AI, with signs of a market bubble emerging. Additionally, a MIT study has questioned the returns on AI investments.
However, positive developments include cloud giants like Google, Microsoft, and Amazon raising their capital expenditure guidance, which bodes well for Nvidia. Meanwhile, demand for AI chips is expanding from hyperscale firms to a broader range of industry clients.
Beyond Nvidia’s earnings, Snowflake, HP, and Dell Technologies are also worth watching, alongside a slew of Chinese ADRs including Pinduoduo, Trip.com, and Alibaba set to release their latest results.
Investors will gain further insight into the U.S. economic outlook this week with the release of the Fed’s preferred inflation gauge—the Personal Consumption Expenditures (PCE) Price Index.
Economists expect the U.S. core PCE index for July to hold steady at 0.3% month-over-month, with a slight year-over-year uptick to 2.9%. The upcoming PCE inflation data is unlikely to derail the Fed’s September rate cut, but higher inflation could dampen expectations for cuts beyond September.
Key Events Overview for This Week
Monday: German August IFO Business Climate Index, U.S. July New Home Sales (annualized), London Stock Exchange closed, JiYue and Li Auto fall new product launches
Tuesday: U.S. July Durable Goods Orders (month-over-month), U.S. June FHFA House Price Index (month-over-month), U.S. August Conference Board Consumer Confidence Index, U.S. August Richmond Fed Manufacturing Index, Dallas Fed President Logan speaks, New York Fed President Williams speaks, RBA releases August monetary policy minutes
Wednesday: U.S. API Crude Oil Inventories for week ending August 22, German September GfK Consumer Confidence Index, Swiss August ZEW Investor Confidence Index, U.S. EIA Crude Oil Inventories for week ending August 22, U.S. EIA Cushing Crude Oil Inventories for week ending August 22
Thursday: Eurozone August Industrial Sentiment Index, Eurozone August Economic Sentiment Index, U.S. Initial Jobless Claims for week ending August 23, U.S. Q2 Real GDP Annualized Revision, U.S. July Pending Home Sales Index (month-over-month), U.S. EIA Natural Gas Inventories for week ending August 22, South Korea Bank of Korea rate decision, ECB releases July monetary policy minutes
Friday: Japan July Unemployment Rate, French August CPI (month-over-month, preliminary), French Q2 GDP (year-over-year, final), Swiss August KOF Leading Indicator, German August Unemployment Rate (seasonally adjusted), Canadian June GDP (month-over-month), U.S. July Core PCE Price Index (year-over-year), U.S. July Personal Spending (month-over-month), U.S. July Core PCE Price Index (month-over-month), U.S. August University of Michigan Consumer Sentiment Index (final), U.S. August One-Year Inflation Expectations (final), Fed Governor Waller speaks on monetary policy