Here's Why Nvidia's Earnings Could Move Your Portfolio Even If You Don't Hold the Stock

Key Takeaways

• Nvidia is set to report earnings after Wednesday’s closing bell, with traders anticipating volatility in the wake of the results.
• The company’s size and influence means the market reaction to the results could have wide-reaching implications for investors.

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A lot is riding on this week’s earnings report from Nvidia.

A strong showing from the company at the heart of the AI boom, due after the closing bell Wednesday, could serve to restore confidence in some previously high-flying corners of the AI trade that have flagged in recent months.

But there’s also a chance Nvidia’s (NVDA) stock could be primed for punishment with anything less than blockbuster results. That could add to recent volatility and build on the AI overhang on the U.S. equity market that has kicked off the year.

Why This Matters for Investors

Nvidia’s results could have implications not only for its stock, but a wide range of others tied to the AI boom, amplifying its sway on broader markets and the portfolios of many investors.

Some investors are already bracing for heightened volatility in the wake of the results. Options pricing suggests traders expect Nvidia shares could move as much as 6% in either direction by the end of the week. Where Nvidia’s stock goes, others in the industry or tied to the AI trade could follow.

With the stock—Nvidia is the world’s most valuable company, with a market capitalization well above $4 trillion—accounting for roughly 8% of the S&P 500, such a swing could impact the market broadly.

That means even if you don’t hold Nvidia’s stock directly, its results could still affect your portfolio if you’re exposed to funds that track it. (That’s likely, since many investors hold broad-market index funds that include Nvidia.) Current options pricing indicates traders expect the S&P 500 could move close to 2% in either direction by the end of the week.

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Nvidia’s results have tended to be sell-the-news events. The stock slid the day after the report in three of the last four quarters, despite better-than-expected results. However, the shares have typically gained in the months that followed. Most analysts tracked by Visible Alpha remain bullish on the stock, anticipating a full recovery to its October highs and more in the next 12 months.

Nvidia shares climbed about 1% to $191.55 Monday. (Read today’s full markets roundup from Investopedia here.) Still, the stock has lost more than 7% from its late-October record.

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