Nvidia earnings matter for more than just tech, AI players

Nvidia (NVDA) is set to report its first-quarter earnings after the closing bell on Wednesday with many on Wall Street focused on the outcome to see how it may test the strength of the market. With the number of AI mentions among companies across multiple sectors increasing from last quarter, details from Nvidia's report may have more influence across those sectors than usual.

Yahoo Finance Markets Reporter Josh Schafer joins Morning Brief to discuss how Nvidia's earnings can impact multiple sectors beyond AI.

For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.

This post was written by Nicholas Jacobino

Video transcript

Let's talk a little bit more about that because it's not just invidia as to why this report matters.

Whatever the company ends up saying about a I chip, demand could matter for a lot more than just the tech sector.

Let's bring in Yahoo Finance's Josh Schafer.

He's here to explain.

And Josh, you've been looking at obviously the outsized influence that NVIDIA could have on a number of sectors, including energy and utilities.

Yeah, Shana.

So we've been talking about this NVIDIA story really for a year now.

Going back to last May is when we sort of had that blowout earnings report.

And from there we kind of looked at OK, what are the other chip plays in A I right, Where do we sort of go from there and you get to a name like maybe a MD, and then we get to kind of the hypercars in a I right?

The companies we talk about a lot meta alphabet, Amazon, Microsoft And then from there, we've spread all the way to what's on your screen now, which is energy when you take a look at the amount of the in the energy sector mentioning a I.

It went from 19% last quarter, up to almost 67% in the most recent quarter.

You've seen a rally in the energy sector, really, For the large part of this year, you've seen a rally in the utility sector for a large part of this year, and most people are not talking about either of those sectors right now without mentioning a I.

And so I think it's going to be interesting when we watch sort of the market action tomorrow and moving forward.

You know, Jensen Wong talks a lot about demand for a I and demand for a I chips.

That's a large part of this call.

It's not just about the numbers.

We like to talk about the numbers and NVIDIA stock itself, but they have the best read on the industry and how much people are gonna be looking for these chips and then the chips.

Of course, when we talk about energy and utilities, it's the power that it takes to utilise these chips, and it takes a lot more power than a normal chip.

And so that's where the energy utilities play has come in and it will be interesting to me to see.

Do we see any of those stocks start to trade with the A?

I demand story at all, because it's certainly become a part of the narrative there.

Well, the other question, too, is when does it become tough to beat consistently on some of the comps that NVIDIA is going to have to face because of its own success as well?

And that's one of the other kind of frames of mind we can't state whether or not an air pocket will not happen or whether it will happen.

But ultimately, the timing of that is something investors have to remember a absolutely Brad.

And that really probably starts next quarter, right?

Which you're gonna get a look into tonight with the guidance for I should say, the current quarter.

Um, so this quarter, NVIDIA NVIDIA is still expecting 400% earnings growth.

I don't think we're gonna call that tough comps right that they're easily beating that when you look forward to the current quarter looking at more like 100% growth, and so it's gonna start slimming down.

And how do people sort of accept that?

Or does it also not start slimming down.

You know, Jose, I'm curious in the conversations that you've been having with these strategists.

How much from your sense is riding on this report just in terms of the overall health of the market and some of that broader participation?

Because it really has been the narrative that the story, like you said here, just even the A I story moving beyond just these mega cat names are starting to see more participation.

So how much is it a make or break report, Do you think for the market?

No.

Yeah, like we we wanna make it like, yes, it matters a lot.

Of course it matters a lot, right?

Because as you guys just pointed out, even simply the weighting of NVIDIA and the S and P 500 could bring the index down tomorrow to some extent, right?

Like, of course, that is kind of what we're talking talking about here.

But the overall rally at this point, we're getting pretty broad, right?

We're getting pretty broad in this rally, and there are a lot of things working right now, so I don't think an idiosyncratic story for the company is necessarily something that could totally bring down the rally because I think it always depends on what's happening with the company, right?

They have a massive amount of demand right now.

If they're not able to meet all of that demand at some point, it becomes in some ways maybe reasonable, because how are you gonna be able to create all of these chips and ship?

All of these chips are also coming out with a new chip, and that's creating sort of its own interesting narrative there.

And it's sort of a company specific thing, right?

And I think that doesn't necessarily challenge the whole rally.

This rally is no longer about people just pouring into NVIDIA, and that's sending the market higher.

Now I do think if you get to a point where they were to warn about actual slowing demand or something like that, then yes, maybe you're starting to take a hit to the A. I narrative and OK isn't as big as we thought.

That's a larger question, but I don't think a lot of people anticipate that to be the narrative tonight.

All right, Josh, we're gonna continue to watch NVIDIA as we get closer to this report later on after the close today here.

We got a lot of time between now and then