Last week was all about inflation. But this week, all eyes are turning back to earnings season, which is in its final stages.
To be more specific, all eyes will be on one company in particular.
I’m talking about NVIDIA Corporation (NVDA).
The AI chip behemoth will announce quarterly results tomorrow and serve as the grand finale of what has been a stunning earnings season. Still, given the AI craze – as well as NVDA’s sheer size and weight in the major indices, Wall Street will closely scrutinize this report. That means any reaction to the report (positive or negative) could create volatility in NVDA shares and the overall market.
So, in today’s Market 360, we’ll consider what to expect from NVIDIA’s upcoming report and why I anticipate another positive earnings surprise. And be sure to watch your inboxes on Thursday for a recap of how the numbers came in.
All Eyes on NVIDIA…
NVIDIA has a history of hitting it out of the park quarter after quarter. And the company continues to experience intense demand for its artificial intelligence chips, posting positive earnings surprises of 18.1%, 29.2%, 19.3%, and 11.4% in the past four quarters, respectively.
Given this track record of positive earnings surprises and the overall AI craze, expectations for this quarter are beyond high.
For its first quarter in fiscal year 2025, analysts forecast earnings to surge 469.4% year-over-year to $5.58 per share. They expect revenue to soar 277.5% year-over-year to $24.6 billion. The analyst community is raising the bar, too, increasing estimates by 11.8% in the past three months.
Now, NVIDIA is one of my favorite stocks and my largest holding in managed accounts. It’s also sporting a gain of over 2,000% in one of our Buy Lists over at Growth Investor. So, I’m rooting for another nice earnings surprise and positive guidance on Wednesday.
But what we need to understand is that NVIDIA is priced for perfection. The stock trades at 31.8 times forecasted 2026 earnings. There are also heavy call option premiums. When there is heavy call option writing, sometimes the “tail wags the dog,” and profit-taking can ensue.
In fact, according to this article from Reuters, the options activity suggests that NVDA’s price could move up to 8.7% in either direction by Friday in the wake of earnings.
Now, NVIDIA is obviously a bellwether of the emerging AI industry. But we should also recognize that this is a $2.3 trillion company by market capitalization. That makes it the third-largest company on Wall Street, behind Microsoft Corporation (MSFT) and Apple Inc. (AAPL). And since the S&P 500 and NASDAQ are weighted by market cap, any major move in the stock will likely affect the broader market.
So, I plan to watch Wall Street’s reaction to NVIDIA’s quarterly results and guidance closely. And as I noted above, keep an eye on your inboxes on Thursday for a recap of how the numbers came in.
This Week’s Ratings Changes
In the meantime, while we eagerly wait for NVIDIA’s earnings to drop, I went ahead and took a fresh look at the latest institutional buying pressure and each company’s financial health and revised my Portfolio Grader for 69 big blue chips. Of these 69 stocks, 19 were downgraded from a B-rating (Buy) to a C-rating (Hold), and 11 stocks were downgraded from a C-rating to a D-rating (Sell).
I’ve listed the first 10 stocks rated as a Hold below, but you can find the full list – including the stocks’ Fundamental and Quantitative Grades – here. Chances are that you have at least one of these stocks in your portfolio, so you may want to give this list a skim and adjust accordingly.
| Ticker | Company Name | Total Grade |
|---|---|---|
| AOS | A.O. Smith Corporation | C |
| DOV | Dover Corporation | C |
| EMN | Eastman Chemical Company | C |
| FFIV | F5, Inc. | C |
| FOX | Fox Corporation Class B | C |
| FOXA | Fox Corporation Class B | C |
| MAR | Marriott International, Inc. Class A | C |
| PNC | PNC Financial Services Group, Inc. | C |
| RBA | RB Global, Inc. | C |
| RRX | Regal Rexnord Corporation | C |
Overall, I’m expecting NVIDIA’s report to be the cherry on top of what has been a stunning earnings season.
The reality is that the first-quarter earnings season has been phenomenal, as I expected. According to FactSet, 93% of S&P 500 companies had posted results by the end of last week. Of these companies, 78% have topped analysts’ earnings estimates, and the average earnings surprise is 7.5%.
I should add that eight of the 11 S&P 500 sectors are reporting year-over-year earnings growth. And the S&P 500 is also on track for an average earnings growth rate of 5.7%.
Meanwhile, while not all of our stocks knocked it out of the park this earnings season over at Growth Investor, the vast majority did beat analysts’ expectations. We’ve had 60 Buy List companies release results so far. Of those, 40 exceeded analysts’ earnings estimates and two posted in-line results. Our average earnings surprise is 17%.
The Next Tech Revolution?
As earnings season winds down, you may be looking for the “next big thing” to add to your portfolio. Based on my latest research, I think I’ve found it…
You see, for the past 30 years, Jeff Bezos has made a career out of spotting cutting-edge technology before his competitors. He did it with the internet in 1994… cloud computing in 2006… Alexa in 2014… But now, Bezos has gone all in again on the next big tech revolution.
It all has to do with a technology I’m calling “QaaS.”
Although “QaaS” represents a huge opportunity, it’s also going to divide America. As “QaaS” spreads throughout the economy, it’s going to further widen the gap between the very rich and the very poor. And investors who don’t react soon risk getting left behind.
That’s why I’m putting this on the radar of my Growth Investor subscribers NOW. Because by the time you hear about it in the mainstream financial media, it may be too late.
In fact, I’ve identified one tiny QaaS company that has a head start in this industry. (And while it’s still early, some experts are predicting it could be the next NVIDIA…)
Go here now to become a Growth Investor subscriber and get the details now.
(Already a Growth Investor subscriber? Click here to log into the members-only website now.)
Sincerely,
Louis Navellier
Editor, Market 360
The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:
Microsoft Corporation (MSFT) and NVIDIA Corporation (NVDA)
