Perhaps the most eagerly awaited of earnings season, Nvidia (NVDA:NASDAQ) will report after the US market close on Wednesday (21 Feb) in what could be a pivotal test of market sentiment given the size of the company and its place at the centre of excitement over the financial promise of AI, or artificial intelligence.

Nvidia chips are considered the gold standard in the AI tool kit and the significant potential for enormous profits years into the future has seen the stock soar, more than tripling in 2023 and already surging 50% this year, making the company the third largest in the US by market cap after Microsoft (MSFT:NASDAQ) and Apple (AAPL:NASDAQ).

Bright sparks have calculated Nvidia gains have accounted for more than a quarter of the S&P 500’s 5.5% increase so far this year.

WHAT THE MARKET EXPECTS

Fourth quarter 2024 (to 31 Jan) consensus estimates call for earnings of $4.54 per share on $20.3 billion of revenue. This time a year ago, the company reported $0.88 on $6.05 billion of revenue. The Santa Clara chip design business has blown past expectations in each of the past four quarters and skipping a soggy third quarter for earnings in 2022, it’s a forecast-thumping record that stretches back to 2019.

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‘When people say that the market is doing well this year, they really mean that tech is doing well, and Nvidia is at the core of that’, said Keith Lerner, chief market strategist at Truist Advisory Services. ‘There is excitement within AI and if that optimism is not fulfilled by earnings then you could see that reverberate quickly and weigh on sentiment.’

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