By Aditya Soni
(Reuters) -Nvidia’s much-awaited results – seen as a barometer of AI chip demand – on Wednesday could prove to be an inflection point for artificial intelligence stocks that have fueled the market’s rally in the last two years.
Investors have raked in big returns from the AI boom that has accrued largely to the so-called “Magnificent Seven”, a group of tech giants that includes Nvidia, Microsoft and automaker Tesla.
That rally marched on despite growing wariness of the stocks’ high valuations – and whether the billions of dollars in investment would yield significant returns.
Those concerns have come to the fore over the last month as technology companies look set to tighten data center spending. Several of the stocks have dropped sharply from their peaks in late 2024, led by a 37% drop in Tesla from its high in December.
The stocks have been further shaken this week after an analyst report said Microsoft scrapped some data center leases. Shares of Nvidia have declined nearly 6% in that time, fed by worries over the low cost of China’s DeepSeek.
But Nvidia has been a savior for the market, having exceeded estimates for revenue and per-share earnings for each of the past eight quarters, according to LSEG data.
“Nvidia has the heavy task of lifting the market mood this week. If it cannot, the selloff in stocks could accelerate,” said Ipek Ozkardeskaya, market analyst at Swissquote Bank.
“Hopes rest on Nvidia’s shoulders.”
The stock rose 2.6% in premarket trading on Wednesday, lifting the chip sector as well as stock index futures from a selloff due to a dour consumer confidence report.
Nvidia, the world’s second most valuable company, has been the top beneficiary of Wall Street’s picks-and-shovels AI trade, adding about $2.7 trillion in market value since ChatGPT’s November 2022 debut — hailed as AI’s “iPhone moment”.
The company’s near 1,800% surge in the last five years makes it the leader of the Mag Seven. Over that time those stocks, on average, have more than tripled, while the benchmark S&P 500 has gained about 65%.
So far in 2025, those stocks have stumbled. The Mag 7 is down about 4.5%, while the rest of the S&P 500 has gained about 4.4% – so the entire index has eked out a mere 1% rise.
Options imply a 7.7% swing for shares of the AI bellwether in either direction after the results, in line with the stock’s average move of 7.6% on the day after results over the last 12 quarters, according to analytics service ORATS.
