Good morning, investors. Each quarter, Nvidia’s earnings arrive like a Super Bowl for market watchers. Today’s no different — and below we’re breaking down what to know.

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Nvidia takes center stage

The entire stock market is bracing for Nvidia’s earnings to reveal whether the AI trade still has legs.

Just as it does every quarter.

The world’s second-most valuable company reports quarterly results after the bell Wednesday, and options pricing implies as much as a 7% swing in its stock price in either direction. 

Given Nvidia’s outsized influence on major indexes — it makes up 5.5% of the S&P 500 — that suggests a broader market move, too.

While shares have surged 24.62% over the last month, investor sentiment on the AI trade remains unusually fragile. 

Here are three questions worth watching. 

Can Nvidia finally impress shareholders with earnings?

Despite beating Wall Street estimates in each of the past three quarters, Nvidia’s stock hasn’t rallied on earnings over the last year. That includes the nearly 9% sell-off in February, which followed an update covering extremely high AI chip demand. 

FactSet estimates see first-quarter earnings of $0.73 per share and revenue of $43.3 billion, up 66% from a year ago. While that sounds strong in a vacuum, it’s a slowdown from the triple-digit expansion Nvidia posted in 2024, when revenue was up 262% year-over-year the same quarter.

Meanwhile, the $5.5 billion inventory write-down tied to the ban on H20 chips to China is set to drag gross margins down as much as 58%, according to Bank of America strategists. 

Is Wall Street too complacent about the China hit?

Morgan Stanley and Bank of America both see downside risks to Nvidia’s earnings and argue that the consensus still hasn’t fully accounted for the H20 restrictions. 

Indeed, less than two weeks ago, CEO Jensen Huang called the chip ban “deeply painful,” estimating the company could lose as much as $15 billion in sales as a result. 

A sizable chunk of that $15 billion may have materialized in this most recent quarter. 

Nvidia is likely lobbying for licenses or workarounds to ship its H20 chips to China, though executives may not reveal that during the earnings call.

From the company’s perspective, eliminating Nvidia from China altogether could foster an alternative, competing Chinese ecosystem that could pose issues for the US down the line. 

If US officials agree with the rationale, investors will benefit.  

Can Blackwell fuel the bull case?

Morgan Stanley believes the stock can soar as high as $203 per share, or about 49% higher from Tuesday’s closing price, but that hinges on sustained Blackwell demand and higher margins over time.

Shipments of GB200 racks are on pace to exceed 15,000 units this year, and demand remains price-insensitive, according to the firm. 

That favorable supply-demand dynamic — coupled with second-half margin recovery and potential wins for China-bound chips — keeps the long-term thesis alive.

But the long term hinges on the near term. Guidance will almost certainly matter more than actual results.

Nvidia remains the most important name underpinning the AI trade. Even momentary weakness could deflate the whole thing.

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Elsewhere

📈Consumers look more confident. The Conference Board’s survey posted its biggest monthly gain in four years on Tuesday, moving from 85.7 in April to 98 in May. That reversed five consecutive months of declines. (The Conference Board)

🤝 Japan’s Nippon will close its acquisition of US Steel. Sources close to the matter say it will land at about $55 per share after President Trump cleared the deal on Friday, calling it a “partnership.” US Steel’s CEO will reportedly be American, and a majority of its board will be from the US. (CNBC)

🏘️ US home prices posted their first monthly drop in two years. The 0.3% month-over-month decline suggests that rising supply hasn’t helped jolt weak demand, which remains muted due to high costs and economic uncertainty. (S&P)

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Rapid-fire

• JPMorgan is pushing to convince the wealthiest Americans to let the firm manage their millions (CNBC)

• Among 541 large-cap active mutual funds with $3.5 trillion in assets, managers were underweight Apple and Nvidia (Barron’s)

• Salesforce will acquire Informatica for $8 billion in a bid to enhance its AI capabilities (WSJ)

• Trump Media stock dropped 9% the same day it announced plans to raise $2.5 billion to buy bitcoin (Barron’s)

• There is misinformation everywhere in financial markets (Pomp Letter)

• Doing great work in the digital age is more about bandwidth than permission (Blog)

• Japan’s bond market is flashing a warning for US investors (Opening Bell Daily)

Last thing

About me

📰 I’m Phil Rosen, co-founder and editor-in-chief of Opening Bell Daily. I’ve published books, lived on three continents, and won awards for my journalism, which has appeared in Business Insider, Fortune, Yahoo Finance, Bloomberg and Inc. Magazine.

I write our flagship newsletter to prepare you for each trading day, unpacking markets, economic data and Wall Street with analysis you won’t find anywhere else.

Feedback? Reply to this email, ping me on X @philrosenn, or write me directly at [email protected].