Happy Nvidia earnings day to those who celebrate—which at this point is pretty much the entire stock market.

The tech giant, which specializes in making chips that power AI software, is up 203% over the past year, and now comprises 5% of the S&P 500’s total market cap.

Nvidia proved itself to be the company to watch when it smashed earnings expectations a year ago, and this time around investors have sky-high expectations of CEO Jensen Huang when first quarter earnings are announced this evening.

The company is projected to keep its winning streak alive due to its rapid innovation in the processing power of its chips and continued strong demand from companies like Microsoft and Meta for its cloud data centers.

• Earnings per share projections call for $5.60 this quarter, well above the $5.16 it reported last quarter.
• The company is expected to announce $24.69 billion in revenue, according to Wall Street estimates—a 243% gain year-over-year.
• Shares have risen 97% year to date and hit a new all-time high on Tuesday, though analysts expect it to go higher—the average 12-month price target pegs Nvidia at $1,057.76, over 11% higher than where shares stand today

So, what should investors be watching during the company’s earnings call? According to Morningstar equity analyst Brian Colello, the company’s data center supply chain constraints will be one question on investors' minds, in addition to how the firm will compete with in-house chip development at major tech companies.

“The sky is the limit for the company’s profitability if it can maintain this lead over the next decade,” Colello wrote. “However, any semblance of the successful development of alternatives could meaningfully limit its upside.”

Shares of Nvidia dropped slightly on Wednesday ahead of its announcement. Traders are already preparing for earnings to trigger a huge stock move in either direction.

The results have implications for the broader market too, even if you’re not directly invested in the company. Its previous earnings results in February triggered the S&P 500 to surge 2.11%—its strongest daily performance in over a year, according to Deutsche Bank.—LB

🟢 What’s up

• Petco was one of today’s top dogs, with shares up 18.37% after announcing surprisingly strong earnings.
• Buzzfeed shares shot up 20.40% after Vivek Ramaswamy announced he has taken an activist stake in the beleaguered multimedia company.
• Solar stocks shined brightly today as investors realize they are yet another way to play the AI trade. SunPower was up 14.23%, Maxeon Solar Technologies rose 21.77%, Daqo New Energy rose 16.95%, and First Solar rose 18.69%.

What’s down

• Lululemon shares sank 7.23% on the unexpected departure of chief product officer Sun Choe, raising questions about the company’s path forward.
• Target shares were down 7.97% after its earnings report this morning revealed the company can’t contend with high inflation.
• Hims & Hers shot higher earlier this week on news it will sell GLP-1 shots directly to consumers, but fell 7.86% today after Citi analysts downgraded the stock, noting its new share price is too high.

When you think of artificial intelligence investments, you probably aren’t picturing power lines—but utilities stocks are being supercharged as the next big way to play AI.

The utilities sector is up 15% year-to-date, outperforming the S&P 500’s overall gain of 12% in 2024. One stock in the sector, the usually sleepy Texas-based Vistra, is up 148% year to date—outpacing all of the so-called “Magnificent 7” stocks.

These kinds of rapid gains are more characteristic of high-flying technology picks than a boring old utilities company, but energy’s role in powering the AI revolution can’t be overlooked.

Huge, energy-intensive data centers are vital for operating AI hardware, and the companies that provide the power to data centers are seeing a residual boost as more tech companies implement machine learning. And the opportunity is only going to get bigger from here: an April Goldman Sachs report noted that data center power demand will rise from 3% of total US power to 8% by 2030.

“We expect this to drive about $50 bn of capital investment in US power generation capacity cumulatively through 2030,” the analysts wrote.

The clean energy transition from fossil fuels to electricity is also giving some of these stocks a boost. According to Morningstar analysts, the demand for electricity from data centers could grow 46% by 2032, potentially even outpacing electricity demand from electric vehicles.

So what’s the best way for investors to play this pick-and-shovel investment in AI?

Morningstar analysts pointed to utility companies Entergy (ETR), which is up 10% this year so far, and Pinnacle West Capital (PNW), which has gained 7% year to date, as undervalued utility stock ideas. They also highlighted Southern Co. (SO) and WEC Energy Group (WEC) as possible plays.

An April Bank of America report noted that a number of stocks are “clear beneficiaries of both the proliferation of data centers, and the associated growth in power needs,” including Constellation Energy (CEG), PSEG (PEG), Vistra (VST), NextEra Energy (NEE) and Dominion Energy (D).

And in its report, Goldman Sachs highlighted 4 utilities stocks analysts believe “have leverage to power demand growth that is underappreciated at current levels:” NextEra Energy, Xcel Energy (XEL), Sempra (SRE), and Southern Co.—LB

• A bill to divide responsibility for cryptocurrency regulation between the Securities and Exchange Commission and the Commodities Futures Trading Commission reached the House of Representatives today.
• A new poll shows that most Americans believe the US is in a recession—a concerning trend, considering it isn’t.
• RedBird Capital and Weatherford Capital are debuting a college sports-specific investment fund—the Collegiate Athletic Solutions (CAS)—to profit from lucrative college athletics programs.
• Home sales unexpectedly dropped in April, despite the fact that inventory rose, according to the National Association of Realtors.
• Tesla’s sales in Europe, which CEO Elon Musk was hoping could revive the battered car company, have dropped to a 15-month low.

The bulls are running rampant as indexes hit new high after new high, dragging Wall Street analysts along with them. The last few weeks have seen some of the best-known pros revise their end-of-year price targets higher as we hit the halfway point of 2024, and who can blame them? No one wants to seem like a stick in the mud when the rest of the market is buying into rate cut hopes and AI fever.

No one, that is, but Stifel’s Chief Equity Strategist Barry Bannister and JPMorgan’s Chief Market Strategist Marko Kolanovic. They are two of the last prominent bears standing on Wall Street, and neither seems poised to revise their S&P 500 price targets higher any time soon.

In a world of blind optimism, it can sometimes be helpful to hear the counterargument—after all, your investing thesis shouldn’t be based solely on hope, but rather a well-balanced look at the whole picture.

• JPMorgan believes the S&P 500 will end the year at 4,200—about 20% lower than where the index stands today. Kolanavic’s reasoning: valuations.
  • “However, with very high equity valuations (as well as tight credit spreads and low levels of volatility), we do not see equities as attractive investments at the moment and we don’t see a reason to change our stance,” Kolanovic wrote in a note to clients on Monday.
• Stifel’s price target is 4,750, which is actually higher than the firm’s original call of 4,650 at the beginning of the year, but still more than 10% lower than today’s levels. Bannister’s reasoning: timing.
  • “With rates normalized and the mid-2024 pop in Core PCE to just over 3% that our models indicate, we expect Fed rate cuts to be pushed back further, causing a middle quarters correction for equities,” Bannister wrote to clients late last week.
• And in a CNBC interview on Tuesday, Bannister reiterated that now isn’t the time to change course.
  • “Every bad call I ever made was turning bullish in May or bearish in October. I would be a little skeptical of a bullish conversion in May at this point in time,” he said. “We’re looking for a pullback in the market. It doesn’t mean it will never rise again, it just means that we’re looking for a correction.”—MR

With CPI and the FOMC minutes in the rearview mirror, May’s market-moving economic releases have come and gone. Thursday will bring a few smaller reports, including weekly initial jobless claims (expected to be 220,000—down from 222,000 last week), new home sales (expected to come in around 675,000—down from 693,000 last month), and we’ll catch a glimpse of how US manufacturing and services are faring with the preliminary monthly PMI report.

Before the open

• Medtronic: This medical technology company has underperformed the market recently, but strong revenue growth over the last few quarters combined with a history of paying a solid dividend make Medtronic one to watch. Consensus: $1.45 EPS, $8.44 billion in revenue
• Netease: The gaming industry is struggling through sweeping layoffs, but analysts have high hopes for this Chinese internet company—the average 12-month forecast across Wall Street is for Netease shares to rise over 36% from today’s prices. Consensus: $1.75 EPS, $3.71 billion in revenue.

After the close

• Ross Stores: A difficult economic environment is making customers more focused on value, and that’s precisely where Ross shines. The off-price retailer should capitalize on brick and mortar sales, though it may encounter resistance from e-commerce competitors. Consensus: $1.35 EPS, $4.82 billion in revenue.
• Intuit: Deutsche Bank analyst Brad Zelnick believes this financial software powerhouse will report a strong quarter thanks to tax season, and the rest of Wall Street agrees, assigning Intuit an average price target of $715.95, 7% higher than today’s prices. Consensus: $9.36 EPS, $6.64 billion in revenue.