Will Nvidia's Earnings Stoke Market Rally Further? Strategist Weighs In: 'I Would Think Investors Are Going To Be Nervous'

The stock market has returned to its winning ways, with the major indices seeing a big lift following a tame inflation report released last week. The continuation of the rally hinges on Nvidia Corp.’s NVDA first-quarter results due on Wednesday. On Friday, a strategist weighed on how the AI frontrunner’s earnings report will impact the broader market.

What Happened: “It will be an obvious disappointment and a negative shock if Nvidia … misses expectation,” said Fund Strat’s Tom Lee in a CNBC interview. The expectations are lofty, he added.

“I would think investors are going to be nervous but ultimately it would be, I think, a prelude to a market broadening because investors who own a lot of Nvidia might want to look for other stocks that are starting to show promise,” Lee said.

On the other hand, if Nvidia beats expectations, it will likely pull money off the sidelines and will likely again propel broadening of the market rally, the analyst said.

“There have been other groups starting to participate like, energy, material this week,” he said.

Lee said he prefers a beat than a miss.

See Also: Best Artificial Intelligence Stocks

Why It’s Important: Following Wednesday’s inflation data, the major indices — the tech-heavy Nasdaq Composite, the broader S&P 500 Index and the 30-stock Dow Jones Industrial Average — all closed at all-time highs. They paused in the next session but not before hitting intraday highs. The Dow, a blue-chip average, settled above the 40,000 mark for the first time ever on Friday.

The uptrend is likely to be preserved, primarily due to the prospects of the Federal Reserve beginning to reverse its rate hikes in the second half.

The market rally seen in 2023 and so far this year has been led by tech stocks, with AI being the main theme. Nvidia has been the torchbearer of the rapidly advancing AI revolution. The Jensen Huang-led company supplies high-performance accelerators to power most AI applications, training and inference.

Analysts, on average, expect the company to report earnings of $5.57, notably higher than the year-ago’s 98 cents per share, and revenue of $24.57 billion compared to $6.52 billion in the same period last year.

Nvidia ended Friday’s session down 1.99% at $924.79, according to Benzinga Pro data. The stock has added about 87% year-to-date. The SPDR S&P 500 ETF Trust (SPY), an exchange-traded fund that tracks the broader S&P 500 Index, settled Friday up 0.14% at $529.45.

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