Strategist warns Nvidia earnings could impact broader market
Principal Asset Management's chief global strategist says Nvidia's upcoming quarterly report is a key test for the AI spending cycle and could influence market direction this week.
Seema Shah, chief global strategist at Principal Asset Management, told CNBC that Nvidia's fiscal second-quarter 2027 results, due after the market close on August 26, will be a pivotal gauge of whether the AI capital-spending cycle is beginning to generate profitable returns. She said the earnings report, together with remarks expected from Federal Reserve Chair Jerome Powell at the Jackson Hole symposium, will shape market momentum, noting that Powell is unlikely to give forward guidance for the September meeting.
"Both Nvidia earnings and what we’re likely to hear from Chair Powell at Jackson Hole are really key to how the market is going to be moving," Shah said.
Shah argued that investor sentiment toward AI has shifted from focusing on spending plans to demanding evidence of monetization. She described the current period as the AI cycle’s “prove-it” phase, emphasizing that Nvidia remains central to the AI cap-ex trade and that any weakness in its performance could affect broader market sentiment.
"Investors are saying, look, we know what the capex plans are at this stage, but we want to know that that’s actually going to be monetized," Shah explained.
She also highlighted the expanding global scope of the AI trade, citing activity in U.S. technology firms, Asian chip makers, Latin American resources and European end-use adoption.
Nvidia’s prior quarter showed revenue of $82 billion, a year-over-year increase of 85 %, and data-center revenue of $75 billion. For the upcoming report, the company has projected revenue of about $91 billion, plus or minus 2 %, and a non-GAAP gross margin near 75 %. CEO Jensen Huang has reiterated that compute drives both revenue and profit, and that the company’s token-based services are now profitable.
Despite a 10-year Treasury yield near 4.7 %, Nvidia’s shares have slipped nearly 7 % over the past week, though they remain up about 12 % year-to-date. Prediction markets assign a high probability to the company beating earnings expectations, with Polymarket estimating a 96.4 % chance of an earnings beat and a 78.5 % chance that data-center revenue will exceed $85 billion.
Analysts maintain a constructive outlook, with an average price target of $304.73 and a forward price-to-earnings ratio of 25. They are watching for signs of margin stability, commentary on China, and the timing of Nvidia’s Rubin product line to assess whether the AI build-out is delivering returns commensurate with customer cap-ex commitments.