NVDA: The waiting game

Stephen Innes SPI Asset Management

U.S. stocks experienced a third consecutive day of decline on Wednesday as concerns about the upcoming earnings report from the U.S. chip designer and artificial intelligence leader weighed heavily on its shares, causing a downturn in the broader U.S. indexes on Wednesday.

Nvidia is scheduled to release its fiscal fourth-quarter results after the closing bell.

Indeed, concerns about Nvidia's lofty valuation have intensified ahead of the announcement, given the chipmaker's remarkable 230% surge in share price over the past year. On Wednesday, Nvidia's stock dropped by more than 3%.

While slightly dated, given the market's alignment with the Federal Reserve's rate cut outlook, officials indicated they were not eager to cut interest rates at their last meeting. According to minutes from the Wednesday session, policymakers expressed optimism and caution on inflation. This discussion occurred as policymakers decided to keep their critical overnight borrowing rate unchanged. They also modified the post-meeting statement to signal that rate cuts would only occur when the Federal Open Market Committee had "greater confidence" that inflation was diminishing.

Sure, the minutes were a tad outdated, but they certainly skewed much more cautiously than when Powell told reporters late last month that a March rate cut was still possible, at least in the market's view.

Hong Kong, China, and Taiwan stock markets will likely pay close attention to Nvidia's results, given that these regions collectively contributed 46% of Nvidia's revenue in the third quarter. This highlights the significant impact that Nvidia's performance can have on Asia markets.

It's intriguing how the anticipation surrounding Nvidia's quarterly earnings report became so exaggerated. Forget concentration risk, which has been dwelled on for far too long and by this point, the inherent risk should be well understood. Instead, it's more concerning how narrowly focused the market perspectives have turned on this solitary earning report. Even folks like myself who spend 15+ hours daily trying to master the macro balancing bike to find the right trade (I've been doing this for 25+ years and still stumble often) are getting caught up in this frenzy.t

Author

Stephen Innes

SPI Asset Management

With more than 25 years of experience, Stephen has a deep-seated knowledge of G10 and Asian currency markets as well as precious metal and oil markets.

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