Why traders will jump on Nvidia’s upcoming warnings

European stocks are set for slight gains as traders eagerly await Nvidia Corp.’s earnings, which could provide key insights into the ongoing growth of artificial intelligence stocks. While Asian equities traded in narrow ranges, Euro Stoxx 50 futures edged up by 0.1%, hinting at a cautious start for European shares. Meanwhile, US stock futures remained steady in Asian trading.

In Hong Kong, Chinese stocks dropped as much as 1.6%, and mainland markets also dipped to their lowest levels since early February. Shares of Nongfu Spring Co., a major bottled water producer, tumbled as much as 13% following the announcement of its slowest half-year profit growth in four years, joining the list of companies with underwhelming results.

Winnie Wu, a China equity strategist at Bank of America, noted, "we are still seeing many more downgrades than upgrades in Chinese earnings." She pointed out that while internet companies are exceeding earnings expectations, other sectors like materials, tech, and auto industries are facing significant downside risks.

The majority of Asian markets were in the red, with notable losses in South Korea and Hong Kong. Two-year US Treasury yields, which are sensitive to interest-rate expectations, fell by three basis points.

Renewed pessimism toward China emerged after weak guidance from e-commerce firm PDD Holdings Inc. earlier in the week. This downbeat sentiment was echoed by other companies, including ANTA Sports Products Ltd., which lowered its full-year sales forecast amid expectations of offering more discounts to attract Chinese consumers. Additionally, Australia’s Fortescue Ltd. reported a full-year profit that fell short of analyst expectations, partly due to a slowdown in iron demand from China.

vKey Chinese companies like Cnooc Ltd., BYD Co., and Meituan are scheduled to report earnings soon. Later in the US, all eyes will be on Nvidia’s results, as investors seek clues on whether the AI boom has further to run. According to Jun Rong Yeap, a market strategist at IG Asia, "Nvidia’s results could be a make-or-break moment for global markets, given the intense optimism surrounding AI stocks over the past year."

In currency markets, the yen extended its losses by 0.4% against the dollar following remarks from the Bank of Japan’s Deputy Governor, Ryozo Himino, who suggested that interest rates would rise if inflation aligns with the bank’s outlook.

On the corporate front, Seven & i Holdings Co. shares dipped after seeking a national security-related designation, potentially complicating a takeover bid from Alimentation Couche-Tard Inc. Meanwhile, Japan issued its highest emergency alert as Typhoon Shanshan approached Kyushu.

HSBC Holdings Plc’s shares outperformed in Hong Kong, following reports that Europe’s largest bank is considering restructuring to eliminate layers of middle management. Additionally, Warren Buffett’s Berkshire Hathaway Inc. disclosed a $982 million sale of Bank of America shares in a regulatory filing.

In the cryptocurrency market, Bitcoin dropped below $60,000, leading a broader retreat that also saw a sharp decline in Ether. Oil prices remained steady after ending a three-day rally, while gold pulled back after nearing its all-time high.

Nvidia’s Earnings: A potential game-changer

Investors are bracing for significant volatility in Nvidia’s stock, with options market data suggesting a potential 10% swing in either direction after the $3.2 trillion company reports its earnings. The stock has surged around 160% this year and a staggering 1,000% from its October 2022 low. Analysts anticipate Nvidia to project over 70% revenue growth for the current quarter, with some forecasting even higher gains. Nvidia’s results will not only be pivotal for its stock but also serve as a key indicator for AI-related investments across the tech sector.

Conclusion

As Nvidia’s earnings loom, traders should be vigilant and ready to adapt. Focus on market signals, especially around AI-related stocks, and manage risk carefully. Diversification and staying informed about global market trends can help you navigate these potentially volatile times effectively.