By Aditya Soni
(Reuters) – Nvidia’s quarterly report on Wednesday is set to be this week’s most watched event on Wall Street, providing a glimpse of demand for its top-of-the-line processors and potentially adding fresh fuel to a smoldering AI rally.
Shareholders have made massive gains from Nvidia, Amazon, Meta Platforms, Alphabet and other “Magnificent Seven” companies as they raced to dominate emerging AI technology following the debut of ChatGPT in November 2022.
More recently, most of those stocks have stumbled and investors have become more cautious.
The launch of low-cost AI models from China’s DeepSeek last month raised fears of a pullback in spending on Nvidia’s priciest AI chips and evaporated more than half a trillion dollars of its stock market value in a single day, a record on Wall Street. Adding to worries, an analyst report suggested Microsoft was scrapping some data center leases.
“Nvidia is probably the most influential stock in the market today because of its massive success in AI,” said Michael O’Rourke, chief market strategist at JonesTrading in Stamford, Connecticut. “The key question for investors is, now that you’ve had this massive growth, will the growth still be strong enough for a company of this size?”
The Magnificent Seven stocks have retreated from their late-2024 peaks and the group is in correction territory, with the Roundhill Magnificent Seven ETF down more than 11% from its December 17 closing high.
Nvidia has routinely exceeded analyst estimates over the last two years, but the magnitude of its revenue beats has narrowed as it faces tough comparisons from strong growth a year ago. That has weighed on the market’s reaction after its results over its most recent two quarters.
“Nvidia has the heavy task of lifting the market mood this week. If it cannot, the selloff in stocks could accelerate,” warned Ipek Ozkardeskaya, market analyst at Swissquote Bank.
With Nvidia set to report its results after the bell, its stock was last up 3.7%, helping lift the S&P 500 0.2%.
Mag Seven stocks added roughly $11 trillion in market capitalization between the debut of ChatGPT in November 2022 and their combined peak in mid-December 2024, with Nvidia adding $2.7 trillion in market value, making it the world’s second-most valuable company at $3.2 trillion.
Nvidia’s stock has surged 1,800% in the last five years. Mag Seven stocks on average more than tripled in that time, while the benchmark S&P 500 has gained about 65%.
Options imply a 9.0% swing for shares of the AI bellwether in either direction following Wednesday’s results, slightly larger than the stock’s average move of 7.6% on the day after results over the last 12 quarters, according to analytics service ORATS.
Nvidia recently traded at 28 times expected 12-month earnings, down from 36 a year ago, with analysts’ earnings estimates climbing even faster than its stock, LSEG data showed.
The tumble in Nvidia’s shares in January after DeepSeek unveiled lower-cost models underscored the risks of the AI trade.
“DeepSeek rattled investors but given Nvidia’s first-mover advantage and the huge infrastructure investment plans from tech giants like Meta, it’s an indication that Nvidia’s high-end chips will remain in demand,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
(Reporting by Aditya Soni in Bengaluru; additional reporting by Caroline Valetkevitch in New York and Noel Randewich in Oakland, Calif.; Editing by Arun Koyyur and Rod Nickel)
