Nvidia's great expectations

Nvidia has a lot to prove when reporting its highly anticipated Q1 earnings today after the bell—and not just to itself. As the largest US company by market capitalization and the undisputed king of the chip market, Nvidia has become synonymous with the startling, rapid ascension of the AI trade.

It’s hard to overstate the company’s influence, especially at this very moment: CEO Jensen Huang just returned from a trip to China with President Trump, and Nvidia shares hit another record high last week. But with success comes mounting pressure: One underwhelming line item in today’s report could send the entire AI trade into a downward spiral.

Nvidia shares were up 1.3% at the end of the day, in anticipation of the latest numbers.

Kingvidia’s challenges

This quarter is also a pivotal one for the chipmaker, as it fends off increased competition in the semiconductor market. Nvidia’s 19.82% gain this year, while handily beating the S&P 500’s 8.58% increase, lags behind other AI heavyweights. Intel, for example, has gained 222.38% this year, Micron jumped 156.47% over the same period, and AMD surged 108.99%.

Then again, those strong gains have made investors anxious that semi stocks are running out of room to run higher. Those three competitors have all sold off in the days ahead of Nvidia’s earnings report as traders lock in profits—they’re fretting about whether the AI trade can endure the higher interest rates everyone is suddenly anticipating.

It doesn’t help that since AI is a large part of the market’s recent rally, investors are wary that broadly diversified indexes like the S&P 500 aren’t actually that diversified anymore. Forget the Mag 7: Chipmakers alone now account for roughly 19% of the market cap of the S&P 500, their highest percentage ever, according to the Wall Street Journal.

The question is whether AI hardware stocks can continue to buoy a market facing headwinds like the fallout from the Iran war, waning consumer sentiment, and steadily accelerating inflation. And Nvidia is, once again, the trendsetter—precisely when it seems to be trailing the competition.

What else to watch: Investors will be closely scrutinizing any news CEO Jensen Huang discloses from his trip to China, how Nvidia’s supply chain is holding up amid the massive datacenter buildout, and how the company will handle competition from rivals, like Alphabet’s TPU chips eating into Nvidia’s market share.

Let’s hope Jensen is wearing his lucky leather jacket.—LB