NVIDIA's stunning performance is coming, will the US stock market's "4 trillion-dollar counterattack" welcome the strongest reinforcements?

According to the Zhitong Finance APP, since OpenAI launched the groundbreaking ChatGPT, the undisputed leader in the AI chip field, NVIDIA (NVDA.US) has seen its total market value skyrocket by nearly $3 trillion in about two years. It is no exaggeration to say that NVIDIA has almost single-handedly reshaped the core framework of the entire U.S. stock market. The theme of "artificial intelligence" has driven the entire U.S. stock market to repeatedly hit new highs, making this AI chip giant have an incredibly huge impact on a series of stock benchmark indices or industry indices.

Top Wall Street investment institutions witnessed this turmoil in the U.S. stock market earlier this month, as well as the subsequent "super rebound" wave. During the period from August 5th to August 23rd, the S&P 500 index, a major benchmark of the U.S. stock market, expanded by a staggering $4 trillion in market value, while NVIDIA's stock price soared by over 28% in just three weeks.

NVIDIA's financial report undoubtedly concerns global technology stock investors' belief in AI. Its financial data and outlook for the next quarter will likely directly determine the momentum of global technology stocks in at least the short to medium term. Data shows that the stock has risen by about 150% so far this year, contributing about a quarter of the S&P 500 index's 18% gain this year. It can be said that NVIDIA's performance has an immensely significant impact on the entire U.S. stock market.

In addition, investors in the surging power stocks, data center REITs, and some renewable energy stocks this year have also focused their attention on NVIDIA's financial report. These areas all directly benefit from this unprecedented wave of AI investment, and NVIDIA's performance will determine whether this AI boom can continue successfully. Therefore, almost all stocks or sectors related to AI will be deeply affected by NVIDIA's performance.

Now, as global investors eagerly await NVIDIA's quarterly results, which will be announced after the U.S. stock market closes on Wednesday, traders will be closely watching their screens, preparing for any significant volatility. The general consensus among Wall Street investment institutions is that following the release of NVIDIA's financial report for the second quarter of the 2025 fiscal year ending in July, it is expected to create or erase market value of up to over a trillion dollars.

Some analysts have stated that considering NVIDIA's market value of about $3.15 trillion, a close to 10% fluctuation in the stock could translate into approximately $310 billion in volatility, which may be the largest expected fluctuation in market value for any company after announcing its performance in history. In fact, the Interactive Brokers' strategy team emphasized NVIDIA's core leadership role in the entire market, analyzing the most active 25 trades on the Interactive Brokers platform in a report on Tuesday, with over 70% of them being related to NVIDIA.

According to the latest betting in the options market, it is expected that NVIDIA's performance will cause its stock price to soar or plummet by nearly 10% in either direction - a move that could reshuffle market value by about $300 billion. And this is just its own market value change. It is expected that all AI-related stocks will experience significant volatility, so NVIDIA's performance will directly determine whether the U.S. stock market's $4 trillion counterattack wave can continue to surge forward. According to Wall Street analysts' expectations, analysts predict that NVIDIA's performance will lead the "4 trillion counterattack" to continue to advance and conquer

The data shows that this AI chip giant accounts for an astonishing 6.7% of the S&P 500 index, making it the world's second largest market capitalization listed company after Apple in this widely used stock benchmark. NVIDIA's weight in the NASDAQ 100 index, known as the "global technology stock barometer," is also over 8%, while its weight in the Philadelphia Semiconductor Index is as high as 14%.

"For investors, NVIDIA is obviously the purest and cleanest way to assess the health and development progress of the core infrastructure in the field of artificial intelligence," said John Belton, portfolio manager at Gabelli Funds. "Therefore, NVIDIA's performance is closely watched by global investors as they have the most direct interpretation of many companies in the artificial intelligence value chain."

Investors seek continued revenue growth

Following the performance reports of AI darlings such as Google's parent company Alphabet Inc. and Amazon, where massive AI-related capital expenditures had a relatively insignificant impact on their revenue data, revenue growth will be a focus of NVIDIA's performance, with the market expecting NVIDIA's revenue, especially from its data center business, to continue to grow rapidly.

So far this year, this AI chip giant has exceeded market expectations for five consecutive quarters and has promised even greater scale of earnings in the future. NVIDIA has become a major beneficiary of hundreds of billions of dollars in artificial intelligence spending, so any slight deviation from this trend will trigger investors' comprehensive doubts about the future of this technology.

At the same time, this key role has effectively transformed once obscure chip companies into an important indicator of the overall strength of the U.S. economy.

"In fact, it (NVIDIA) should not be a barometer of the economy," said Shana Sissel, founder and president of Banríon Capital Management. "But it has indeed become a center, mainly because its scale and stock performance have an impact on the entire market."

Wall Street analysts generally expect NVIDIA's quarterly revenue to reach around $29 billion, more than double last year's performance report. They expect future sales guidance to increase again, but there is a new challenge - in light of reports of possible delivery delays and design flaws in its highly anticipated next-generation Blackwell architecture AI chip, the company must provide the latest developments that can convince AI enthusiasts to continue buying NVIDIA stock or call options. The company stated in early August that production of Blackwell architecture AI chips is expected to increase according to the set targets in the second half of the year In Wall Street, the top investment bank Goldman Sachs recently supported NVIDIA's financial report and provided revenue forecasts higher than the market's general expectations. The bank expects NVIDIA's Q2 revenue to reach $29.769 billion, with earnings per share of $0.68, exceeding market expectations by 4.1% and 5.9% respectively. Goldman Sachs believes that the Q2 financial report will show that the demand for NVIDIA's Hopper architecture H100 GPU remains strong among major global enterprises, and the upgraded H200 is expected to be mass shipped under strong demand.

Another top investment bank, Morgan Stanley, expressed extreme optimism about NVIDIA's performance in a research report on August 25th, stating, "We expect this to be a strong quarter, likely surpassing the higher market expectations." The Morgan Stanley analysis team also pointed out that if NVIDIA's revenue exceeds expectations, AI-related stocks may have a potential upside of 3-15%. Conversely, if it falls short of expectations, the entire AI-related stock market may see a potential downside of 5-10%.

However, Morgan Stanley advised that even if NVIDIA's financial report or next quarter's performance guidance disappoints, investors who favor tech stocks should "not give up on AI-related stocks." Morgan Stanley believes that the stock prices of AI-related companies have already readjusted after the August plunge and are far from reaching the extreme valuation levels seen during the bursting of the dot-com bubble.

Global investors may scrutinize Jensen Huang's remarks word by word

In the report, Morgan Stanley pointed out that whether NVIDIA's Q3 performance guidance meets market expectations may not have a significant impact on the stock price trend. The real impact on the stock price trend will be whether the management can alleviate any concerns among investors about potential delays in Blackwell's mass shipments due to chip design adjustments.

NVIDIA CEO Jensen Huang previously stated in May that the architecture chips would be shipped in the second quarter of this year. However, earlier this month, The Information reported that the company is facing delays in Blackwell shipments due to design issues, which could postpone a large number of shipments to the first quarter of 2025.

"Concerns about any delays in the Blackwell architecture AI chip may affect the market's performance expectations for NVIDIA's fiscal year 2025, making management comments under Jensen Huang's leadership - especially optimistic forecasts for the 2025 outlook and expectations for Blackwell architecture AI chip shipments and demand - crucial," wrote the Bloomberg Intelligence analyst team led by Kunjan Sobhani in a report on August 21.

Howard Chen, CEO of Kurv Investment Management, stated that any comments on Blackwell's progress in the earnings call will be carefully analyzed by the market, similar to the announcements from the Federal Reserve "Everyone will carefully ponder every word," he emphasized.

In a report in August, the analysis team at HSBC wrote: "We expect NVIDIA to reduce its focus on the B100/B200 AI GPU based on the Blackwell architecture in the second half of the year, and instead increase its emphasis on the production capacity of the H200 based on the Hopper architecture."

Analysts and investors will also focus on the demand for NVIDIA's upgraded H100 version AI chip, the H200, which may offset the revenue impact of delayed deliveries of Blackwell architecture chips. If the chip products currently launched by NVIDIA can achieve performance not inferior to expectations, it is likely to indicate a promising outlook for the next-generation performance-upgraded Blackwell chip products.

"If they perform very well here, it could be a good sign, and these results are due to strong global demand for the H200," said Belton from Gabelli. "This may paint an encouraging picture for the incremental demand expectations for Blackwell next year."

Of course, it is undeniable that Wall Street remains very optimistic about the prospects of NVIDIA's stock. According to data collected by institutions, the stock has 66 "buy" ratings, 8 "hold" ratings, and 0 "sell" ratings. The target price for the next 12 months is around $145, which implies a potential upside of about 13% from the current trading price.

NVIDIA's valuation also experienced a significant contraction due to the sharp drop in tech stocks in August, with a forward P/E ratio of about 38x, lower than 44x in June and over 60x last year. The forward P/E ratio of the S&P 500 index is around 21x.

Concerns about how long the massive spending on artificial intelligence will continue and when AI monetization will be achieved, as well as concerns about the demand for Blackwell chips and shipment schedules, weighed on NVIDIA's stock price during the trough in early August. However, the rebound since then indicates that investors are still willing to buy the stock on dips, as the frenzy of large tech companies' AI infrastructure deployment shows no signs of stopping.

Belton said, "I think the bar for beating expectations has been raised in the past few quarters." "If you think about the situation of all large tech stocks in this earnings season, I believe the market certainly hopes to see healthy beats and significantly higher-than-expected performance outlook."