How Nvidia's Q4 Earnings Could Impact Major ETFs

Nvidia Corporation NVDA is poised to release its fourth-quarter earnings today after market close. Analysts project earnings per share of 84 cents and revenues of $38.1 billion. Given Nvidia’s significant presence in various ETFs, this earnings report could substantially influence their performance.

ETFs with Nvidia Exposure To Keep An Eye On

Nvidia holds considerable weight in several prominent ETFs, notably:

VanEck Semiconductor ETF SMH: Approximately 19% of this ETF’s holdings are in Nvidia, making it highly sensitive to Nvidia’s stock movements.

SPDR S&P 500 ETF Trust SPY: Nvidia comprises about 6.14% of this fund, reflecting its status as one of the largest companies in the S&P 500 Index.

Invesco QQQ Trust QQQ: With an 8.1% allocation to Nvidia, this ETF is influenced by the company’s performance, given its focus on major non-financial companies listed on the Nasdaq.

Also Read: Nvidia Stock Stumbles Into Q4 Earnings: Can It Defy NVDA Bears?

History and Relevance Of Nvidia As An Important Stock

For a quick memory refresh, in January, Nvidia experienced a significant stock decline of over 20% within days, primarily due to concerns about China’s DeepSeek AI model potentially reducing demand for Nvidia’s AI chips. Despite this sharp drop, the SPDR S&P 500 ETF Trust, where Nvidia holds a 6.5% weighting, saw a minimal decrease of less than 2% from its all-time highs, indicating the broader market’s resilience.

Although Nvidia is no longer the largest company by market capitalization, Apple having reclaimed the top spot, it remains a substantial component of major ETFs like SPY. Nvidia’s performance influences not only its stock but also the semiconductor industry and tech giants that rely on its products, creating ripple effects throughout the market.

As Nvidia prepares to report its fourth-quarter earnings after the market closes today, analysts anticipate strong results, though uncertainties persist regarding the extent of outperformance. Previous earnings reports have led to mixed stock reactions, with notable fluctuations following each announcement. For instance, the stock rose more than 9% in response to its Q1 2024 results.

Investors are keenly observing whether Nvidia can surpass expectations amid concerns about slowing growth, margin pressures, and the impact of AI developments like DeepSeek. Nonetheless, while Nvidia’s influence on the broader market has slightly diminished, its earnings report remains a critical event for investors, with potential implications for related sectors and the overall market sentiment.

Also Read: Nvidia Stock ‘Quite Cheap’ Ahead Of Q4 Earnings: Analyst Says ‘Growth Story Is Intact’

Experts Weigh In Ahead Of The Earnings

Nvidia stock maintains a consensus analyst rating of Buy, with an average price target of $172.28.

Recent evaluations from Rosenblatt, Morgan Stanley, and Tigress Financial suggest a potential upside of over 50%, with an average price target of $197.33.

Analysts from Wedbush and Oppenheimer have reaffirmed their price targets at $175, citing increased demand for Nvidia’s advanced chips as major technology companies expand their investments in AI infrastructure. UBS analysts, maintaining a $185 price target, observe that rising investor expectations and improvements in the supply chain could boost sales of Nvidia’s Blackwell line.

Oppenheimer analysts also note that the rapid emergence of Chinese AI startup DeepSeek may positively impact Nvidia, as increased competition encourages American clients to intensify their AI development efforts.

Investors express concerns about potential spending reductions by Nvidia’s key customers, especially following significant capital expenditures in prior years and recent AI advancements emerging from China, according to a CNBC report.

A significant portion of Nvidia’s revenue is derived from a select group of companies constructing extensive server infrastructures, commonly referred to as “hyperscalers.” In fiscal 2024, Nvidia reported that a single customer accounted for 19% of its total revenue. Consequently, any indication of reduced spending by these major clients could significantly influence Nvidia’s stock performance.

Investors are concerned that growth may be slowing, and margins could be under pressure, according to etf.com. A strong earnings report from Nvidia could lead to an uptick in ETFs’ values, while disappointing results might exert downward pressure on them.

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