Stock Markets: Everyone’s waiting for Nvidia

This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

Another Dow record
Stocks edged higher ahead of Nvidia’s earnings report. The Dow Jones Industrial Average eked out a 0.02% increase, marking its second consecutive record close. The S&P 500 and Nasdaq Composite both rose 0.16%. Nvidia shares climbed 1.5% as investors look to the chip giant’s earnings release expected Wednesday. Meanwhile, the yield on the 10-year Treasury rose slightly, while U.S. oil prices fell 2.2% on the hope Libya’s production halt would be temporary.

‘Most important stock’
Nvidia has been volatile of late. The AI chipmaker’s market cap has increased ninefold since 2022 and briefly became the world’s most valuable public company. But soon after the stock dropped nearly 30% over seven weeks, losing $800 billion in value. The stock has since rebounded to within 7% of its all-time high. With quarterly results due Wednesday, Wall Street is focused on Nvidia’s performance, as it could impact the broader market. “It’s the most important stock in the world right now,” EMJ Capital’s Eric Jackson told CNBC. “If they lay an egg, it would be a major problem for the whole market. I think they’re going to surprise to the upside.” CNBC’s Kif Leswing takes a look at what to expect from Nvidia’s earnings.

Asia dips amid some bright spots
Asia-Pacific markets mostly fell Wednesday. Australia’s S&P/ASX 200 dropped around 0.2% after the country reported a 3.5% year-on-year increase in its July CPI, above the 3.4% expected. Not all’s bad in the region, though. Shares of JD.com climbed around 1.4% after the Chinese online retailer announced a $5 billion buyback, while Xpeng shares popped close to 2.3% after the Chinese automaker announced a new mass-market car.

Cryptocurrencies stumble
The price of bitcoin fell around 4.2%, as of publication time, to $59,412.14, according to Coin Metrics. Ether tumbled around the same percentage to end up at $2,478.88. “Crypto markets moved down sharply, triggering a leverage driven liquidation,” said Steven Lubka, head of private clients and family offices at Swan Bitcoin. “The move appears to have been kicked off by a material drop by Ethereum, which has been struggling all year versus bitcoin.”

Nordstrom soars 
Nordstrom shares surged more than 7% in extended trading after the retailer posted earnings that exceeded Wall Street expectations. The retailer reported adjusted earnings of 96 cents per share, above analysts’ estimates, on revenue of $3.89 billion, up 3.4% from a year ago. Despite the earnings beat, Nordstrom provided cautious full-year guidance, expecting adjusted EPS between $1.75 and $2.05 and sales ranging from a 1% decline to 1% growth.

[PRO] Renewed confidence in Nvidia
Everyone is waiting with bated breath for Nvidia’s earnings, which are coming out Wednesday after U.S. markets close. Some fear the company can’t sustain its momentum. But Truist Securities, a capital market company, just raised its price target of Nvidia.

While the S&P 500 is within touching distance of its record high, the PHLX Semiconductor index remains more than 14% below its all-time high, with many of its components in bear market territory. As CNBC’s Fred Imbert writes, that has many investors questioning the sustainability of the recent rally. 

Nvidia has been a key driver of the market’s rally this year, with its stock up 160%, despite a recent dip. As the second most valuable U.S. stock, investors are eagerly awaiting its earnings report to see if it can sustain the AI momentum. However, with the stock trading at 37 times its forward earnings — above the S&P 500 tech average — there are concerns about whether Nvidia can meet high expectations, especially regarding future guidance.

“Go back to the middle part of the year, the S&P was up 15%, five percentage points of that gain was Nvidia alone,” Scott Chronert, Citi’s U.S. equity strategist, told CNBC. “There’s no question from a basic index weighting perspective the importance of Nvidia.” However, the market needs to continue to see evidence of AI productivity-enhancing tailwinds playing out, Chronert said, highlighting that future guidance will be crucial.

Joseph Moore, a semiconductor industry analyst at Morgan Stanley, acknowledges that while competitors like AMD, Broadcom and Marvell present viable alternatives, Nvidia’s execution remains strong. “We expect them to at least hold share in 2025… These numbers have gotten so big so quickly, I think that’s the bigger risk,” Moore told CNBC. He sees Nvidia retaining its market share of 90% of AI processors.

Going into the earnings, Truist Securities analyst William Stein raised his price target for Nvidia, CNBC’s Pia Singh explains why. And CNBC’s Kif Leswing takes a look at what to expect from its earnings.

The broader tech landscape is also under scrutiny this week, with earnings from Dell and Salesforce adding to the mix. August saw a tech sector sell-off, but Federal Reserve Chair Jerome Powell’s dovish comments helped reverse some of that downturn. 

However, Nomura analyst Naka Matsuzawa warns that stronger-than-expected tech earnings could challenge the current market pricing of rate cuts.

“This week U.S. tech companies’ earnings reports will be the main focus, and if the risk of a collapse in tech stocks subsides, this pricing-in of rate cuts could be partially reversed,” he wrote in a Monday note.

— CNBC’s Lisa Kailai Han, Brian Evans, Fred Imbert, Arjun Kharpal, Kif Leswing, Annika Kim Constantino, Gabrielle Fonrouge, Pia Singh, Spencer Kimball and Yeo Boon Ping contributed to this report.