Published - August 23rd, 2023 @ 10:22 AM (GMT+2)

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Nvidia (NASDAQ:NVDA), the tech giant renowned for its graphics processors, is set to release its Q2 earnings report, and the financial world is watching closely. The company's Asian suppliers have seen a dip in anticipation of the announcement, with investors keenly focusing on the demand for artificial intelligence (AI).

Nvidia's Stellar Performance:
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In 2023, Nvidia's shares have skyrocketed, tripling in value. This impressive performance highlights the growing excitement around the potential of AI in business, which has contributed significantly to the S&P 500's 14% gain this year. Nvidia's growth has outpaced other tech giants, including Apple and Microsoft, with the collective rise of these "Magnificent Seven" megacap stocks accounting for nearly two-thirds of the S&P 500's increase through July.
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However, the broader equity market has shown signs of faltering. August has seen the benchmark index drop by over 4%, largely due to rising Treasury yields that could potentially make stocks less attractive. This market instability has shifted even more attention to Nvidia's upcoming earnings report.
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The Importance of AI: 
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The tech world is buzzing with two primary concerns: Can Big Tech maintain its market leadership, and is the AI narrative genuinely transformative? Anthony Saglimbene, the chief market strategist at Ameriprise Financial, suggests that positive news from a significant player like Nvidia could shift market sentiment.
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Nvidia's previous report in May took the market by surprise. A promising forecast led to a 24% surge in its stock in just one day. This was followed by an 8% rally in the S&P 500 technology sector over the subsequent five days. The company's success is largely attributed to its role in powering generative AI apps like ChatGPT.

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AI's Market Influence:
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An analysis by Societe Generale highlighted the impact of AI on the market. Removing 20 stocks popular among AI-related exchange-traded funds from the S&P 500 would reduce the index's performance by about 13 percentage points.

Investor expectations are high, with Nvidia shares climbing nearly 12% since last week, reaching an all-time high before pulling back. Chuck Carlson, CEO at Horizon Investment Services, questions whether the upcoming earnings will meet these heightened expectations.
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Potential Market Movements:
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Options trading data suggests that Nvidia shares could swing by nearly 11% post-earnings, a significant deviation from the 8.6% average movement observed over the past eight quarters. Given Nvidia's substantial weight in the S&P 500 and Nasdaq 100, any price movement will have a pronounced effect on these major indexes.

While Nvidia's earnings are in the limelight, investors are also awaiting a speech from Federal Reserve Chairman Jerome Powell. Any indication that interest rates might remain at current levels for an extended period could further impact stock prices.

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Goldman Sachs recently identified Nvidia as a primary beneficiary of the "AI revolution." An analysis by the firm revealed that a basket of 11 AI-focused stocks had returned 69% in 2023, far outpacing the S&P 500's 7% gain. Nvidia's adoption of AI has been a significant factor in this performance, with the company being a standout example.

The information on mexem.com is for general informational purposes only. It should not be regarded as investment advice. Investing in stocks involves risk. A stock's past performance is not a reliable indicator of its future performance. Always consult a financial advisor or trusted sources before making any investment decisions.
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