Nvidia earnings present unusually elevated macro risks

Nvidia earnings after the close today are the biggest risk event of the week and arguably of the year as sentiment towards the broader AI space has become shredded on the edges (software, hyperscalers) and increasingly fragile at the core (infrastructure). As the poster child of the AI trade there are considerable and asymmetric risks to global risk sentiment from today's print.

The earnings report presents a significant driver for broader risk sentiment and only a strong beat and raise is likely to assuage worries around the wider AI ecosystem after a bruising start to the year. This print is an unusually strong macro risk event due to both the market cap impact of the stock on the broader market, and its pivotal role on sentiment given current investor fears over the AI trade. These fears have so far been more focused on businesses likely facing disruption, but this ties in with the durability of the AI buildout and economic basis for Nvidia.

Market reactions will be telling – does a miss pressure the USD for instance as investors tie worries about AI to those about the US? Specifically, do AI stock valuations matter for the wider investment thesis on the US? For the stock market there is clear direct impact from Nvidia earnings with the stock making up ~7% of the S&P 500 by market capitalisation. For the wider macro view – if ‘the economy is the stock market’ then the stock market is AI till. The AI megatrend has dominated the entire case for US tech for more than 2 years and since Liberation Day the upwards revision to 2026 earnings for the S&P 500 has been driven entirely by Mag7.

Even a strong print from Nvidia may not be enough as investors are not just concerned about sales but the durability of the investment thesis, which is contingent upon the sustainability of growth within the entire ecosystem, from hyperscalers, to software and hardware vendors.

Nvidia is expected to report a 68% rise in revenues to $66 billion for the fiscal fourth quarter, with the April quarter being guided year-over-year growth of 63% to $72 billion, driven chiefly by the date centre segment with demand for GPUs from cloud service providers.

Despite all the attention NVDA has traded a pretty narrow range around $170 to ~$190 for three months. And options markets indicate the smallest move post-earnings in three years. Nevertheless, there is a high chance that Nvidia’s earnings drive a sizeable reaction in the broader stock market, with the effect felt in the wider macro space.