Why Aug. 26 Is a Big Day for the Stock Market
Key Points
Nvidia, the dominant chip player, will report its second-quarter earnings, followed by a live conference call hosted by CEO Jensen Huang.
Nvidia is not only the largest stock by market cap, but also one of the companies at the center of the artificial intelligence (AI) trade.
Nvidia will have to do more than just beat earnings to get the stock moving.
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Each month, there are typically a few days when news or a single data point can more or less move the entire market in one direction or the other. Often, it might be the monthly jobs or inflation report. Rarely does it involve just one company.
But on Aug. 26, it will be all about Nvidia (NASDAQ: NVDA), the world's largest company by market capitalization, with a $5.2 trillion market cap and nearly 7.3% weighting in the broader benchmark S&P 500 Index.
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After the market closes, the company will report earnings results for the second quarter of its fiscal year 2027, followed by a conference call between CEO Jensen Huang, other members of Nvidia's C-suite, and Wall Street analysts.
It's a big day for the market.
Image source: Getty Images.
The AI trade depends on Nvidia
For the past several years, artificial intelligence has driven the stock market higher and played a big role in economic growth. So, if the AI trade falters, most of the market could suffer as well.
Nvidia is at the center of this trade, as the company provides the bulk of graphics processing units (GPUs) and also central processing units (CPUs) that essentially power AI. Of course, Nvidia needs demand for its chips, but its earnings results are typically a pretty good indicator of the broader AI trade.
In recent months, Nvidia has also taken steps to seemingly shore up the industry.
For instance, securities filings recently revealed that Nvidia will provide $105 billion to help OpenAI fund and build a new data center in Ohio capable of delivering 4.2 gigawatts (GW) of AI compute, with the potential for an additional 3.75 GW.
In a recent CNBC panel, Huang and several of the largest banks and firms on Wall Street announced a memorandum of understanding to securitize GPUs to facilitate funding for data centers.
Nvidia also said it would have the option to backstop up to a quarter of each loan to provide better interest rates for borrowers.
Details are scant, but this continues to make the health of Nvidia more vital to the AI trade, which is already quite critical for the market that is attempting to generate three straight years of returns of at least 20%.
What Nvidia will need to do to move the market higher
One issue for Nvidia is that the company has been so successful that the bar is already incredibly high. Simply reporting earnings and revenue ahead of consensus estimates doesn't necessarily guarantee the stock will move higher.
Wall Street analysts expect Nvidia to report $92.07 billion of adjusted revenue in the second quarter, representing nearly 97% year-over-year growth. Adjusted earnings per share are projected to be $2.09, up nearly double from the same quarter one year ago.
As reported by MarketWatch, the boutique investment firm BeSpoke recently said Nvidia is already "a triple-play king," meaning it regularly beats consensus estimates for earnings, revenue, and forward guidance. In fact, it's done this in 14 of its last 20 earnings reports.
So, it will likely take more than a triple play for Nvidia to move the needle.
Some other things Nvidia could do to get the market's attention include continuing to report gross margins in the mid-70s percentile. Gross margins indicate the company's moat and pricing power, which some investors worry could deteriorate as chips become more commoditized.
In its first quarter of fiscal 2027. Nvidia reported adjusted gross margins of 75% and guided for the same result, plus or minus 0.5%, in the second quarter.
Investors will also be curious about what demand is like for Nvidia's most advanced GPU yet, the Vera Rubin, and how its newly launched CPU product is faring.
Nvidia caught some investors by surprise -- in a good way -- when it announced that its new CPU, specifically built for agentic AI, is expected to generate $20 billion in revenue this year alone, instantly making it one of the dominant CPU players.
Whether you are invested in Nvidia or not, investors should pay attention to the earnings report. As the largest stock in the S&P 500, it could move the index significantly following earnings.
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Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
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