After a sweeping rally for U.S. stocks Friday fueled by rising expectations of an interest rate cut next month, earnings from the world’s most valuable company and a key measure of inflation could command the spotlight this week. Chipmaker Nvidia (NVDA) has been front-and-center in the AI boom, with surging sales on growing demand for the emerging tech. Investors will likely be watching for updates on its most advanced offerings, as well as its plans to navigate changing trade policies, when the company posts its quarterly results. Investors can also look forward to the latest release of the Federal Reserve’s favored measure of inflation, which could influence whether the central bank makes its first interest rate cut of the year in September.
Nvidia Earnings To Highlight Strength of AI Demand
Nvidia’s second-quarter results due Wednesday could show whether the chipmaker continues to set the pace in the AI race, with analysts anticipating another sales record despite some headwinds from China export curbs. Nvidia said in May that it expects to report growing revenue, though it warned of a hit from China export restrictions to the tune of $8 billion. The company could offer more updates on its business in China after making a deal with the Trump administration to share revenue from its AI chip sales there. Nvidia is also considering offering a variety of new products for the Chinese market in advance of government approval. Some other companies set to report this week include chipmaker Marvell Technology (MRVL), Dell (DELL), CrowdStrike (CRWD), cloud provider Snowflake (SNOW), and engineering software maker Autodesk (ADSK), along with several Canadian banks.
Key Inflation Data Could Influence Fed Moves
A fresh update on inflation is set to come Friday, with the Personal Consumption Expenditures Index for July, after dovish remarks last week from Fed Chair Jerome Powell boosted expectations for a rate cut in September. The June PCE report showed that inflation ticked higher that month, but a similar inflation report released earlier showed price increases in July were lower than some feared. The PCE report is the Fed’s preferred measurement of inflation, giving its reading potentially more impact with central bankers ahead of September’s interest rate decision. This week will also bring a pair of consumer surveys, data on the U.S. trade balance, and housing market data, among other things.
What analysts are saying about U.S. stocks
Cannacord Genuity: “As the poster-stock for AI tailwinds, NVDA results this Wednesday could be a major test of investor appetite for the AI / large tech trade and another potential catalyst for small caps.”
UBS: “The S&P 500 looks expensive on a forward P/E of more than 22x; 18.9x for S&P 500 ex Tech+. Valuation concerns matter more when EPS downgrades are underway, but continued stabilisation and widening breadth of improvement should be an offset near term. We think that modern market structures like buybacks and reliable flows from global pension savings schemes contribute to the ’momentum’. If hard data/jobs begin to weaken faster negative earnings revisions could lead to increased volatility and more sellers, but there are strong arguments that this market structure continues to offset valuation downside in the U.S.”
RBC Capital Markets: “Without substantial further upward revisions to earnings forecasts, we believe this poses a challenge to further gains in the broader U.S. market and the big cap growth/Tech trades in particular. There is still some room, but not a lot of room, in other parts of the U.S. equity market (Small Cap, S&P 500 equal weighted) to travel before returning to their own respective valuation peaks, a condition which may end up helping us know when other parts of the market have put in a short-term top as well.”
Wolfe Research: “Optimism over the central bank restarting its cutting cycle sometime in the next several months will likely lead stocks higher over the near term and we continue to see the current environment as later cycle. Along this vein, we continue to favor Tech and Communication Services along with other secular growth stocks as the AI spending narrative continues to be the dominant theme in the markets.”