Nvidia's Earnings: Still Important, but Not the Market-Moving Event It Once Was

Key Points:

* Nvidia's quarterly results were once the most anticipated event of earnings season.
* However, the broader market has expanded, reducing Nvidia's relative influence on the S&P 500.
* Nvidia's growth trajectory is slowing, with expected revenue growth of 73% for the upcoming quarter, a decline from previous quarters.
* Despite strong results, Nvidia's stock price has not always responded positively due to supply constraints and cautious forecasts.
* However, Nvidia remains a key player in the AI sector and the broader market, but its dominance is no longer as pronounced as in the past.

In Depth Analysis:

For several years, Nvidia's quarterly earnings releases have held a prominent place on investors' calendars. As the final major technology company to report, Nvidia's results often provided a closing statement on the AI sector's performance.

However, the market is now experiencing a welcome broadening, with a wider range of companies contributing to the S&P 500's gains. Nvidia's impact has diminished, accounting for only 5% of the index's increase this year, compared to 20% in 2024.

The S&P 500's top performers have also diversified. Meta, Walmart, JPMorgan, Amazon, Palantir, and Eli Lilly are among the major contributors, replacing the "Magnificent Seven" that dominated the index in 2024.

Nvidia's growth trajectory is also slowing. While the company's initial AI-assisted blowout quarter in 2023 was remarkable, estimated revenue growth for the upcoming quarter is 73%. This is still exceptional, but it represents a significant decline from the heady days of 2023 and 2024.

Moreover, Nvidia's stock price has not always responded positively to strong earnings, as supply constraints and cautious commentary have tempered investor enthusiasm. In the previous quarter, the stock rose only 0.5% after reporting, with a 6.3% decline in the quarter before that.

Despite these caveats, Nvidia remains a pivotal player in the AI sector. Its immense size and influence on Big Tech companies make it an important bellwether for the industry. Fundstrat's Mark Newton emphasizes Nvidia's continued relevance, noting the significant references to the company made by its tech peers.

Nvidia's position at the heart of the AI trade and the broader market cannot be overlooked. However, in the current diversifying environment, its dominance is no longer as absolute as in the past.