‘Super Bowl’ Nvidia earnings stand to test searing AI trade

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The rally in U.S. stocks faces an important test next week

The S&P 500 has pared a sharp drop it suffered after U.S. economic worries contributed to a sell-off at the beginning of the month and again stands near a fresh all-time high.

“Nvidia is the zeitgeist stock today,” said Mike Smith, a portfolio manager at Allspring Global Investments, which holds the company’s shares in its portfolios. “You can think of their earnings four times a year as the Super Bowl.” Nvidia’s valuations have also climbed, as the stock soared about 750% since the start of 2023, making it the world’s third-most valuable company as of Thursday, while also drawing comparisons to the dotcom bubble of more than two decades ago. The company’s shares trade at about 37 times forward 12-month earnings estimates, compared with a 20-year average of 29 times, according to LSEG Datastream.

The trajectory of monetary policy and the U.S. economy also looms large for investors. In a Friday morning speech in Jackson Hole, Wyoming, Federal Reserve Chair Jerome Powell offered an explicit endorsement of interest rate cuts, saying further cooling in the job market would be unwelcome.

 

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