Nvidia Earnings: Will a $292B Market Cap Swing Reshape AI, the S&P 500, Nasdaq, and Dow?

Nvidia Earnings: The Biggest Market Event Left in 2024

Today, Nvidia (NVDA) is set to release its Q3 earnings after the market closes, an event that analysts consider the most significant financial moment remaining this year. While other key events like the Federal Reserve’s December meeting, inflation data, and jobs reports still lie ahead, Nvidia’s results have the potential to move markets even more due to its outsized influence on AI, tech stocks, and major indices.

Why Are Nvidia’s Earnings So Crucial?

Nvidia options are signaling an 8.5% price move in either direction, according to ORATS. This translates to a $292 billion market cap swing—an unprecedented figure for the options market and one of the largest in history. To put this in perspective, such a move would exceed the total value of 95% of S&P 500 companies.

Historically, Nvidia’s stock has a tendency to outperform when earnings exceed expectations. Of the last 12 quarters, five saw outsized post-earnings moves, all of which were to the upside. This has traders optimistic that Nvidia could once again surprise to the upside.

What Does This Mean for the Broader Market?

As a heavyweight in the S&P 500, Nasdaq 100, and now the Dow Jones Industrial Average, Nvidia’s results will significantly influence the broader market:

• S&P 500: Nvidia has driven 23% of the index’s gains this year, making it the most important stock in the index. Its leadership in AI and massive market capitalization mean that an earnings surprise—positive or negative—could ripple across the S&P 500, influencing investor sentiment and sector performance.
• Nasdaq 100: Nvidia’s influence is even stronger here, as the AI and semiconductor trade dominates this tech-heavy index. A major earnings beat could spark momentum among other high-growth tech stocks, while a miss might weigh heavily on the Nasdaq.
• Dow Jones: Nvidia’s addition to the Dow underscores the growing importance of the tech sector within the traditionally industrial-focused index. As the Dow is price-weighted, Nvidia’s stock price movement will have an outsized impact compared to lower-priced components. Furthermore, Nvidia’s inclusion means mutual funds and ETFs tracking the Dow have likely increased their holdings of Nvidia, amplifying the stock’s influence on this index.

How Could Nvidia Shape the AI Trade?

Nvidia is expected to report 82.8% year-over-year revenue growth, driven by demand for AI-focused chips. Its guidance will be critical, especially with the upcoming Blackwell chip, which could determine the next stage of AI development.

“The market will extrapolate whatever Nvidia says to the entire AI trade,” noted Nancy Tengler, CEO at Laffer Tengler Investments. A strong report could boost optimism for AI-related stocks, while a miss might cool the sector.

Volatility and Trader Sentiment

Traders are pricing in high volatility, with options markets slightly tilted toward a bullish outcome. However, Bank of America analysts caution about potential downside risks, suggesting investors hedge against broader market impacts.

The Bottom Line

Nvidia’s earnings will shape the narrative for AI, major indices, and broader market sentiment as 2024 comes to a close. Investors should brace for a high-volatility event that could define the year’s final trading weeks.