Nvidia's Earnings Hold Key To Assess Market's 'Buying Power,' Says Fundstrat's Tom Lee: 'There's An Equal Chance…The Stock Sells Off'

In a recent interview, Tom Lee, the managing partner at Fundstrat Global Advisors, suggested that the upcoming earnings report of Nvidia NVDA could be a significant indicator of the market’s strength.

What Happened: Lee, in a conversation with CNBC, emphasized the importance of Nvidia’s earnings report, which is due to be released on Wednesday. He stated that the report could provide insight into the market’s remaining “firepower.”

“There’s an equal chance that Nvidia has a great number and the stock sells off,” Lee said.

“I think that’s going to tell us, perhaps, a lot of the buying power is used up.”

See Also: Bitcoin, Ethereum, Dogecoin Gains Remain Intact Going Into Fresh Trading Week — Analyst Says King Crypto

The upcoming earnings report from Nvidia is expected to shed light on enterprise spending trends in the AI sector, validating lofty valuations and setting the growth path for the year.

Why It Matters: Ives had earlier emphasized the importance of Nvidia’s earnings in confirming the acceleration of AI monetization. The analyst hinted that the earnings report could provide the missing piece in the AI puzzle, following signals from other tech giants like Microsoft Corp., Meta Platforms, Inc., and Amazon, Inc.

Nvidia's stock has been on a rollercoaster ride in recent months. In November 2021, the company faced significant challenges, resulting in a 68% decline and finding support at $180. However, the company's shares bounced back due to increased demand for artificial intelligence and gaming, leading to a 529% increase in the stock price.

Analysts are now predicting significant Q4 earnings, with a forecast of $4.53 per share, a substantial increase from the prior year's $0.88 per share Q4 earnings. However, a Bank of America analyst has also warned that the stock could face a potential pullback after the earnings report, with an 11% implied post-earnings move based on bullish buy-side estimates for Nvidia’s Q4 earnings.

In the wake of a significant drop in Nvidia's shares, investors are being advised to consider this as an opportunity rather than a setback. This dip could be attributed to profit-taking ahead of the earnings release, according to the host of CNBC's "Mad Money, Jim Cramer. Despite this, the drop is seen as a potential entry point for investors who have not yet invested in Nvidia.

Read Next: Sam Bankman-Fried Visibly Looks Thinner, Scruffier In New Prison Photos Made Public By Crypto Influencer

Photo courtesy: Nvidia Corp on Flickr