Big tech dragged the stock market away from its all-time highs, with Wall Street awaiting Nvidia Corp.’s earnings on Wednesday for confirmation the chipmaker can meet the lofty expectations set by the artificial-intelligence boom.

While the ongoing earnings season has so far reaffirmed the view that Corporate America is holding up well, the reporting period has been mixed for the “Magnificent Seven” megacaps. Ahead of the chipmaker’s numbers, some traders decided to lock in profits — with the market also weighing a report that Microsoft Corp. is developing a networking card as an alternative to the one supplied by Nvidia.

The bar is high for the company at the heart of the AI revolution — which boasts the best performance in the S&P 500 this year after more than tripling in 2023. Nvidia’s revenue is expected to be buoyed by soaring demand in its data-center business. AI should remain strong, especially with Meta Platforms Inc. and Tesla Inc. loading up on graphics processing units, Susquehanna said.

To Matt Maley at Miller Tabak + Co., while bets are that Nvidia will report solid earnings and forecasts, one thing to keep in mind is that the stock has not always responded well to fabulous results.

“Sometimes their expectations are SO high that we get a ‘sell the news’ reaction,” Maley said. “We don’t know which reaction we’ll get this week, so we wouldn’t be surprised if investor and traders sit on their hands until they report this Wednesday evening.”

In the run-up to its results, Nvidia sank over 4 per cent. The Nasdaq 100 dropped almost 1 per cent, while the S&P 500 fell below 5,000. A gauge of chipmakers slid 1.6 per cent. Walmart Inc. climbed after reporting strong earnings. Treasury 10-year yields were little changed at 4.27 per cent. The dollar wavered.

“We’re seeing a material correction in the AI high flyers today,” wrote Louis Navellier, chief investment officer at asset manager Navellier & Associates. “A correction was overdue, though the AI theme is hardly broken...but it certainly is a defensive day.”

While the artificial-intelligence frenzy has boosted stocks that have been linked to the technology, Nvidia is one of the few firms to have demonstrated significant revenue growth from AI.

Because of its uncontested leadership in AI-training chips, Nvidia’s market capitalization has ballooned to around $1.7 trillion, briefly topping the values of both Inc. and Alphabet Inc. While other big techs have hardly performed badly in 2024, juxtaposed with Nvidia’s surge they appear to be relegated to the slow lane.

The rally has been fueled in part by Nvidia handily beating analysts’ estimates — something it’s done several quarters in a row. The company may now have to do that again. But analysts estimate that sales more than tripled in the fourth quarter, and they’re projecting a growth increase nearly as big in the latest period.

“In our view, this is the market event to watch this week,” said Anthony Saglimbene at Ameriprise. “While one company doesn’t usually make or break a market, the growing influence of Nvidia on the overall bullish stock narrative, key tech companies, and broader indexes warrants close attention.”

Beyond its results, investors will be particularly keen to know how Nvidia’s chief Jensen Huang sees demand developing across the rest of the year, according to Matthew Weller at and City Index.

“Any signs that the AI boom may be slowing could lead to a big bearish reversal in the stock, so traders are justifiably on tenterhooks ahead of the release,” Weller said.

While 2023 was the beginning of the biggest tech transformation since the first days of the Internet in the 90’s, “investors needed to see enterprise spend ramping to justify these valuations and show the growth path ahead for 2024 and beyond,” said Dan Ives at Wedbush Securities.

Nvidia’s rapid expansion supports an argument bulls have been making to justify lofty valuations for tech giants: that the companies will deliver bigger profits than contemplated in current estimates, thereby making them cheaper than they appear.

Despite surging to new highs this month — and taking the entire stock market with it — Nvidia’s forward price-to-earnings ratio is only back to where it was before its last earnings report in November, and about a third lower than it was before the fourth-quarter earnings last year. The stock has managed to grow its way into a cheaper valuation thanks to cheaper profits.

Nvidia investors may have almost $200 billion in market value riding on this week’s earnings report, according to options positioning.

Prices for short-term calls and puts imply a 10.6 per cent move in the chipmaker’s shares on Thursday, the session after its earnings report, according to data compiled by Bloomberg. That would sway Nvidia’s market capitalization by some $180 billion, one of the largest single-session moves on record, still trailing records set by Meta Platforms — holder of both the biggest one-day drop and largest single-session gain.

The stock of the Santa Clara, California-based company has also become one of the most-loved on Wall Street. It has 60 buys, five holds and only a single sell rating among analysts tracked by Bloomberg.

Even with Tuesday’s losses, the S&P 500 is still up over 4 per cent this year, buoyed in part by optimism around artificial intelligence and signs of a resilient economy.

UBS Group AG raised its year-end forecast for the S&P 500 for the second time since December, as Wall Street strategists struggle to keep pace with the market’s strength to start 2024. The update comes a few days after Goldman Sachs Group Inc. also boosted its view on US equities for the second time since late last year.

“Despite our bullish outlook, it appears we were not bullish enough,” the UBS strategists wrote in a note to clients. While the market sold off on robust consumer- and produce-price data last week, “our work indicates these demand-driven readings are constructive for future returns.”

Craig Johnson at Piper Sandler notes that February’s performance so far has been exceptionally stronger than its historical seasonality. For now, the S&P 500 is also heading toward its fourth straight monthly advance.

“We suspect the back half of the month will be a time for bulls to rest and trim some profits,” he said. “We anticipate plenty of in-flight turbulence during the coming weeks as the S&P levels off around 5,000.”

To Jay Woods at Freedom Capital Markets, the stock index showed signs of getting tired and was due for a pause.

“It did just that but remains secure in its uptrend,” he noted. “Any pullback towards 4,900 should be considered routine and normal.”

Enthusiasm for Stocks Is Near Record High | We asked: Which asset do you expect to have a better volatility-adjusted return over the next month?

U.S. stocks will keep outperforming Treasuries over the next month, according to the majority of respondents in the latest MLIV Pulse survey.

The percentage of equity bulls is the second-highest since the question about the relative performance of stocks and bonds was first asked in August 2022. Stocks are expected to keep beating bonds well past the earnings season and heading into the Federal Reserve’s March meeting.

Corporate highlights:

  • Walmart Inc. also said it agreed to buy smart-TV maker Vizio Holding Corp. for about $2.3 billion.
  • Macy’s Inc. said it received nine nominations to its board from Arkhouse Management Co., the activist investor leading an effort to acquire the department-store company.
  • Home Depot Inc. reported a fifth straight comparable sales decline, underscoring a drop in demand for house improvement due to high mortgage rates and a slowdown in construction.
  • The Biden administration is in talks to confer more than $10 billion in subsidies to Intel Corp., people familiar with the matter said, in what would be the largest award yet under a plan to bring semiconductor manufacturing back to U.S. soil.
  • The U.S. plans to award $1.5 billion to GlobalFoundries Inc., the largest domestic maker of made-to-order semiconductors, as part of the Biden administration’s effort to strengthen the nation’s chip production.
  • Capital One Financial Corp. agreed to buy Discover Financial Services in a $35 billion all-stock deal to create the largest US credit card company by loan volume, giving the combined entity a stronger foothold to compete with Wall Street’s behemoths.
  • KeyCorp Chief Executive Officer Chris Gorman touted his company’s contained exposure to commercial real estate lending, an area of concern for investors in regional US banks amid heightened interest rates and property vacancies.

Key events this week:

  • Eurozone consumer confidence, Wednesday
  • Nvidia, HSBC earnings, Wednesday
  • Federal Reserve releases minutes from its January meeting, Wednesday
  • Atlanta Fed President Raphael Bostic speaks, Wednesday
  • Eurozone S&P Global Services PMI, S&P Global Manufacturing PMI, CPI, Thursday
  • U.S. initial jobless claims, U.S. existing home sales, Thursday
  • ECB issues account of January meeting, Thursday
  • Fed Governor Lisa Cook and Minneapolis Fed President Neel Kashkari speak, Thursday
  • China property prices, Friday
  • Germany IFO business climate, GDP, Friday
  • ECB publishes 1- and 3-Year inflation expectations survey, Friday

Some of the main moves in markets:


  • The S&P 500 fell 0.6 per cent as of 4 p.m. New York time
  • The Nasdaq 100 fell 0.8 per cent
  • The Dow Jones Industrial Average fell 0.2 per cent
  • The MSCI World index fell 0.3 per cent


  • The Bloomberg Dollar Spot Index was little changed
  • The euro rose 0.3 per cent to $1.0810
  • The British pound rose 0.2 per cent to $1.2624
  • The Japanese yen was little changed at 149.98 per dollar


  • Bitcoin rose 0.2 per cent to $51,993.67
  • Ether rose 0.3 per cent to $2,976.66


  • The yield on 10-year Treasuries was little changed at 4.27 per cent
  • Germany’s 10-year yield declined four basis points to 2.37 per cent
  • Britain’s 10-year yield declined seven basis points to 4.04 per cent


  • West Texas Intermediate crude fell 1.3 per cent to $78.18 a barrel
  • Spot gold rose 0.4 per cent to $2,024.69 an ounce

This story was produced with the assistance of Bloomberg Automation.