Nvidia Earnings: The Ultimate AI Trade Test as Stocks Hit Record Highs—Here’s Your Week Ahead Watchlist

Nvidia's looming earnings report puts the entire AI narrative on trial—just as markets flirt with record-breaking territory.

The Chipmaker's Moment of Truth

All eyes lock on Nvidia this week. Its performance doesn't just move shares—it could validate or vaporize billions in AI-driven market optimism. No pressure.

Market Psychology at Peak Levels

Stocks hover near all-time highs, banking on AI to keep delivering. One miss from Nvidia, and that house of cards gets a serious shake. Because nothing says 'stable market' like pinning everything on one chip stock.

What Traders Are Watching

Guidance, data center revenue, and any hint of softening demand. This isn’t just a earnings call—it’s a sentiment bomb waiting to detonate.

So grab your popcorn. Either AI proves it's the real deal, or we're all reminded that Wall Street sometimes confuses hype with strategy.

The door has 'opened wider'

During what was likely his final speech at the Jackson Hole Symposium as Fed chair, Jerome Powell told the audience the "shifting balance of risks may warrant adjusting our policy stance." For investors, the words "may warrant" became a green light on rate cuts next month.

Markets rallied in kind.

In his speech, Powell highlighted that "downside risks to employment are rising," while "a reasonable base case is that the effects [of tariffs on inflation] will be relatively short-lived."

JPMorgan's chief US economist, Michael Feroli, told clients in a note on Friday Powell's comments indicated the "door to a September cut opened wider." And market pricing suggested as much — investors were placing 85% odds on Friday that Fed will cut interest rates by a quarter of a percentage point at its September meeting, per the CME FedWatch Tool.

These rate cut hopes will be put to the test on Friday with the release of the Personal Consumption Expenditures (PCE) index, the Fed's preferred inflation measure.

Economists expect annual "core" PCE — which excludes the volatile categories of food and energy — to have clocked in at 2.9% in July, up from the 2.8% seen in June. This WOULD mark the highest annual increase since February. Over the prior month, economists project "core" PCE at 0.3%, unchanged from June.

"Tariff-related price pressures are broadening across the goods sector and appear to be spilling over into the services sector," wrote economists at Wells Fargo in a note.

"We ultimately expect Core PCE inflation to peak slightly above 3% by the end of the year. With inflation drifting in the wrong direction and the labor market losing momentum, the Federal Reserve faces difficult trade-offs in balancing its dual mandate."

Nvidia earnings on deck

The largest stock in the market is slated to report quarterly results after the bell on Wednesday.

Wall Street expects Nvidia to report earnings per share of $1.01 on revenue of $46.13 billion. A slew of Wall Street analysts have raised their price targets on Nvidia leading into the release, but at least one of those analysts warned the quarter may not impress to the level investors have become accustomed to over the past several years.

"We expect NVDA to report strong [second quarter] results and guide [third quarter] slightly below consensus, as we expect NVDA's outlook to exclude direct revenue from China given pending license approvals and uncertainty on timing," Keybanc analyst John Vinh wrote in a note to clients on Aug. 19.

Still, Vinh boosted his price target on the AI chip leader to $215 from $190, as he expects Nvidia's outlook to improve into next year.

Nvidia shares entering the release are up 32% this year and have nearly doubled since the market bottom in April.

The broadening begins

Nvidia's earnings release comes at a precarious moment for the broader AI trade, which, outside of Friday's all-encompassing rally, has largely hit pause over the past few weeks.

So far in August, the Information Technology sector (XLK) has been the worst performer in the S&P 500.

Citi's head of trading strategy, Stuart Kaiser, wrote in a note to clients on Aug. 20 that he expects "sentiment selling" in the tech and AI trade to clear quickly unless Nvidia "posts a large disappointment." In other words, Kaiser sees the tech trade picking back up that started Friday as likely to continue.

As tech has taken a back seat, some of this year's laggards have become the leaders.

As markets believe the Fed is inching closer to cutting rates, interest rate-sensitive areas of the market have soared higher. The small-cap Russell 2000 (^RUT) index is up 5% over the past month, while the SPDR S&P Homebuilders ETF (XHB) is up over 10%. In that same time period, the S&P 500 is up just 2.6%.

"We’ve changed back to a market condition that is more about rotation than the outright risk aversion," Interactive Brokers chief strategist Steve Sosnick wrote in a note on Aug. 20.

Weekly Calendar

Monday

: Chicago Fed activity index, July (-0.10 prior); New home sales, month-over-month, July (+0.1% expected, +0.6% prior); Dallas Fed manufacturing activity, August (+0.9 prior); New home sales, month over month, July (+0.1% expected, +0.6% prior)

: No notable earnings.

Tuesday

: FHFA house price index, month over month, June (-0.2% prior); S&P CoreLogic Case-Shiller 20-City, year over year, non-seasonally adjusted (+2.8% prior); Conference Board Consumer Confidence, August (96.4 expected, 97.2 prior); Richmond Fed manufacturing index, August (-20 prior)

: BMO (BMO), MongoDB (MDB), Okta (OKTA), PVH (PVH)

Wednesday

: MBA Mortgage Applications, week ending Aug. 22 (-1.4% prior)

: Nvidia (NVDA), Abercrombie & Fitch (ANF), CrowdStrike (CRWD), Five Below (FIVE), HP (HP), Kohl's (KSS), Pure Storage (PSTG), Snowflake (SNOW), The J.M. Smucker Company (SJM), Urban Outfitters (URBN), Williams-Sonoma (WSM)

: Second quarter GDP, second estimate (+3.1% annualized rate expected, +3% prior); Second quarter personal consumption, second estimate (+1.4% previously); Initial jobless claims, week ended Aug. 23 (235,000 prior); Pending home sales, month over month, July (+0.2% expected, -0.8% prior)

: Affirm (AFRM), Best Buy (BBY), Bath & Body Works (BBWI), Dick's Sporting Goods (DKS), Dell (DELL), Dollar General (DG), Gap (GAP), Marvell (MRVL), Petco (WOOF), TD Bank (TD), Ulta (ULTA)

Friday

: PCE inflation, month over month, July (+0.2% expected, +0.3% prior); PCE inflation, year over year, July (+2.6% expected, +2.6% previously); "Core" PCE, month over month, July (+0.3% expected, +0.3% prior); "Core" PCE, year over year, July (+2.9% expected; +2.8% prior); University of Michigan consumer sentiment, August final reading (58.6 expected, 58.6 prior); wholesale inventories, month-over-month, July preliminary (+0.1% prior); MNI Chicago PMI, August (45.2 prior, 47.1 expected)

: Alibaba (BABA)

Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.