Nvidia Corp NVDA is due to report earnings this week and Ritholtz Wealth Management’s Josh Brown believes the reaction to the print could have massive consequences for the markets.
What To Know: Nvidia led the markets higher in 2023 amid extreme optimism surrounding artificial intelligence. The company is uniquely positioned to capture a sizable part of the AI market given the high demand for its advanced AI chips.
Nvidia finished 2023 up 239% and is already up another 37% in 2024 even with Tuesday’s pullback. Last week, the company became the third-largest stock in the world, after passing Alphabet and Amazon.
The chipmaker is scheduled to report fourth-quarter financial results on Wednesday. Investors will have high expectations going into the print, given the stock's move over the last year and the company's streak of blowout quarterly results.
Related Link: What To Expect From Nvidia And Its Semiconductor Rivals In This Week’s Earnings Setup
Even if Nvidia is able to deliver another strong quarter, the reaction to the report could be underwhelming, which could put the Nasdaq in a tough spot, Brown said Tuesday on CNBC’s “Fast Money Halftime Report.”
“Be prepared for this company … getting to a point where nobody can be impressed anymore, and that’s a very real possibility,” he said.
Brown trimmed his Nvidia position for just the second time since 2017 earlier this month and noted that it felt like people had become so bullish that they were running out of new good things to say.
In a new post this week, Brown referred to Nvidia as “the most crowded trade on Earth” and warned that the biggest risk for the Nasdaq is a great report from Nvidia that results in just a single-digit pop in its share price.
“If that's all we get, psychologically we'll be in trouble. The air will come out of everything tech-related in response,” Brown said.
Last week, Brown noted that he believes there's more than a 50% chance the Nasdaq has topped for the year and a 99% chance that it has topped for the quarter. Nvidia shares are down about 5.5% since he made that call, and the Nasdaq 100 is down about 0.3%, per Benzinga Pro.
“In this particular moment, I believe the reaction to Nvidia's quarter next week will tell us whether or not we've topped out for the time being. I think it's more important than any inflation reading, economic data point or Fed speech,” Brown said.
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NVDA Price Action: Nvidia shares were down 4.6% at $692.16 Tuesday afternoon, according to Benzinga Pro.
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