Nvidia is the most important indicator of the hype surrounding artificial intelligence. The quarterly figures announced today will influence the stock markets. The expectations are high, as are the risks for the global financial markets.
A year ago, Nvidia took off on the stock market. When the figures for the first quarter were presented, the chip manufacturer was already valued at a whopping $750 billion. The profits achieved were so great that the shares shot up 20 percent on the same day. But that was just the beginning: Nvidia is currently worth more than $2.3 trillion on the stock market.
No wonder investors around the world are waiting for the quarterly results, which will be published after the US market closes today. Nvidia is the most important indicator of the hype around artificial intelligence that was triggered by the chatbot ChatGPT. The company is the leading manufacturer of special processors that can handle the computing power required for AI.
Nvidia accounts for a significant portion of the total market value of all companies listed in the US leading index S&P500 – the index includes some of the largest US corporations, including the oil giant Exxon Mobile, Coca Cola, Tesla and Google parent Alphabet. Nvidia weighs as much weight in the S&P 500 as these companies combined.
Nvidia’s quarterly figures therefore influence the entire stock market. As the “Financial Times” reports, analysts at Wall Street bank JPMorgan include today’s publication in a list of possible scenarios that could move the US stock market violently – of a similar caliber to economic data pointing to a US recession .
Some of the biggest price increases in Nvidia shares followed quarterly figures – and this had an impact on the global financial markets. On the one hand, the company has enormous stock market weight, and on the other hand, it is an indicator of how the growth of AI is doing. The results are therefore felt beyond the US stock market. The logic behind this: If Nvidia presents good figures and the share price goes through the roof, investors’ willingness to take risks increases. If the figures disappoint, investors become more cautious.
Impact on African government bonds
Nvidia’s performance therefore not only affects the global stock markets, but also, for example, the price of gold and silver. An emerging market government bond trader at a major U.S. bank told the Financial Times that Nvidia’s quarterly results have influenced African government bond prices in the past. When the share price rises, the entire market moves “and risk sentiment brightens everywhere.”
Expectations are high in advance: On average, analysts assume that Nvidia generated sales of $24.7 billion in the first quarter and earned a bottom line of $12.9 billion. Most analysts agree that the chip specialist will have to perform well above these forecasts to continue driving the share price higher. But that also means that the potential for disappointment is significant.
This can be seen on the futures exchanges where options are traded. These financial instruments can be used to bet on both rising and falling prices. According to the news agency “Bloomberg”, US options on Nvidia shares currently make up the lion’s share of all such transactions involving a single US company. The volume is often almost a third of the total market, sometimes half.
According to the information, the transactions with Nvidia options show that the futures market is currently expecting the price of Nvidia shares to change by more than 8 percent – that is, that it will either rise or fall that much. That would mean that Nvidia’s market value would increase by $180 billion, or the same amount would disappear into thin air. Siemens is currently valued at around $150 billion on the stock market.