Nvidia Earnings: All Eyes on Guidance

The stock market may once again be setting overly high expectations for Nvidia, as investors look for positive signals amid renewed concerns over trade tariffs.

Time for a Breakout?

Despite being a frontrunner in the tech industry, with, Nvidia has struggled this year. Its performance has lagged behind the Nasdaq, which gained 12% over the last month (although it has been on the back foot recently). The company has faced a series of challenges, including a $5.5 billion write-down following the ban on H20 chips. Investors are anxiously waiting for solid guidance for the second quarter in Wednesday's earnings, where more challenges could arise.

Analysts expect Nvidia to report a relatively modest from $0.61 a year ago, despite an expected 66% sales growth to $43.2 billion. This is partly due to the write-down as well as margin pressures from the. Analysts hope the company will provide guidance on when its gross margin will improve. Another concern for investors is the impact of the modified, cheaper H20 chips on the bottom line after the company announced a cheaper version that complied with the new Trump Administration restrictions.

Waiting on What the Market Says

received a rocky reception, despite posting enviable growth on the top and bottom lines (revenue and profits). The initial reaction was an 8% drop, quickly reversing to a 4% gain the next day. Analysts cited concerns over guidance around margins, as there has been trepidation about the timing of cost pressures catching up with sales as the market becomes more saturated. If history is a guide, the upcoming market reaction is likely to hinge more on guidance than on its quarterly performance.

As for the tech-heavy Nasdaq, the index was graded lower during Nvidia's prior earnings as they from the White House. With markets waiting with bated breath for signs of easing trade tensions, the opposite could occur for the Nasdaq and Nvidia if the latter impresses with its outlook. US Treasury Secretary Scott Bessent said the US is seeking deals with 18 key trade partners, which could boost optimism among traders and support the more risk-weighted major stock indices.

New Records Ahead?

While Nvidia peaked at $155 in January and the Nasdaq at 22260 in February (leading the decline), both are currently around 10% below their record highs after having bottomed out on 7 April. Notably, Nvidia trades around 43% higher from the bottom, while the Nasdaq has gained around 30%, with both displaying an impulsive upside bias. If Nvidia beats estimates, the stock could return to record prices and ultimately reach a fresh peak towards the $200 barrier. However, losing the $115 swing might reverse prices towards the bottom near $90, which could have implications for the Nasdaq, pressuring the prices towards or below the 19K handle.

Source: SpreadEX / Nasdaq vs. Nvidia

Key Takeaways

Nvidia's earnings would likely impact the stock and may influence the broader Nasdaq depending on how the market perceives guidance. While analysts expect modest growth, guidance on margins as well as the impact of trade restrictions will be closely watched. Any positive developments in the ongoing trade negotiations could also boost optimism and support the risk-weighted major stock indices, paving the way for fresh records.