Morning in New York: Nvidia results will determine the course of trading

Daily review and forecast of events on the U.S. stock market from Mikhail Denislamov, Deputy Director of Freedom Capital Markets Research.

The main event that will determine the mood in the upcoming session was the quarterly report of Nvidia (NVDA), which became a kind of a test of strength for the entire AI narrative. The corporation's revenue amounted to $46.74 billion with the consensus of $46.06 billion, and earnings per share reached $1.05 with average expectations of $1.01.

Nevertheless, NVDA shares are down 2% on the pre-market as investors' inflated expectations, embedded in the quotations, failed to materialize. The sell-off was triggered by the fact that revenue from chips for data centers for the second quarter in a row is below Wall Street's optimistic benchmarks ($41.1 billion against the consensus of $41.29 billion). The main vulnerability for the corporation remains uncertainty over shipments to China. Nvidia explicitly stated that it lost $4 billion in revenue in the reporting period due to lack of sales of specialized H20 chips in the PRC, and, more importantly, did not include potential revenues from them in its current quarter outlook. Although the company has licensed shipments and estimates their potential volume for China at $2-5 billion, this uncertainty was perceived as a significant risk.

Nvidia's report was a catalyst for profit taking across the semiconductor maker sector: Broadcom (AVGO), Advanced Micro Devices (AMD), Micron (MU), and TSMC (TSM). This suggests that investors see Nvidia's troubles as a systemic risk to the development of AI solutions, the prospects for which have remained the main driver of this year's rally.

Macro statistics will add context to the forecast of the Fed's actions. Today, the Fed will release revised GDP data for the second quarter (consensus: +3.1%, previous estimate: +3%) and the weekly jobless claims report (consensus: 230k, previous estimate: 235k). If GDP growth turns out to be higher than expected and there is another confirmation of labor market stability, it may shift the benchmarks regarding the timing and intensity of QE easing. Together with signs of weakening influence of the main growth driver of the last months (AI sector), this will put pressure on the bulls.

Dollar General (DG), Dick's Sporting Goods (DKS), Burlington (BURL), Best Buy (BBY), Bath & Body Works (BBWI), Li Auto (LI) and Ollie's (OLLI) will report quarterly results before the open. Marvell (MRVL), Dell (DELL ), IREN (IREN), Autodesk (ADSK), Affirm (AFRM), Ulta Beauty (ULTA ) and Webull (BULL) will report after the main session.

Futures on US indices demonstrate neutral dynamics. We assess the balance of risks for the upcoming session as neutral with a moderate level of volatility. We focus on the S&P 500 movements in the range of 6430-6530 points (from -0.8% to +0.8% to the closing level of the previous session).

- Shares of cloud platform Snowflake (SNOW) soared more than 12% in the postmarket after posting a strong Q1 fiscal 2025 report. The company's revenue surpassed the $1 billion mark for the first time, totaling $1.04 billion with a forecast of $1.01 billion, and adjusted EPS reached $0.24 with a consensus of $0.21. Investors were also encouraged by strong customer retention of 124% and backlog growth of 34% YoY to $6.7 billion. The strong results and positive outlook signaled strong demand for cloud and data solutions.

- The positive market reaction was also observed in the securities of storage systems provider Pure Storage (PSTG), which added 15.8% after the publication of a strong report for the second quarter and an increase in the annual forecast. The company reported revenue growth of 13% YoY to $861 mln, while subscription revenues rose 15% to $414.7 mln. An additional positive factor was an increase in revenue guidance for fiscal 2026 to $3.60-3.63 bln, which was taken by investors as a sign of management's confidence in sustainable demand for the company's products.

- Shares of cybersecurity company Crowdstrike (CRWD) were down 3.2% in the postmarket, though its quarterly results beat expectations. The company reported revenue growth of 21% to $1.17 billion (forecast: $1.15 billion) and adjusted EPS of $0.93 (forecast: $0.83). The market reacted negatively to the company's third-quarter revenue guidance, putting it in the range of $1.21-1.22 billion, with a consensus of $1.23 billion. The company continues to feel the financial impact of last year's security failure, forcing it to offer customer incentives and incur additional costs, negatively impacting guidance.

August 27 trading on American stock exchanges ended with growth. S&P 500 updated the historical closing maximum, having added 0.24%. Nasdaq 100 rose by 0.17%, Dow Jones rose by 0.32%, and Russell 2000 rose by 0.64%. The session was held in anticipation of the release of Nvidia's quarterly report, which came out after the end of the main session. Investors also remained cautious ahead of the PCE index release scheduled for August 29. The energy sector (XLE: +1.12%) led the growth, while the health care industry (XLV: -0.06%) closed slightly down.

President of FRB New York John Williams said that the current monetary policy is "moderately restrictive" and the incoming data may justify a gradual reduction in rates. Against this background, the market estimated the probability of this step in September at 87%. The entry into force of duties of 50% on imports from India and the auction on placement of five-year government bonds (it was held at a discount of 0.7 bp due to weak demand under the influence of new supply) did not have a significant impact on the mood of stock players.

- Kohl's (KSS: +24%) reported a 5% decline in revenue to $3.55 billion for the quarter, but its net income increased 131.8% YoY to $153 million. The market was positive on management's success in improving gross margins, reducing inventory and controlling costs.

- Photronics (PLAB: +7.6%) reported quarterly revenue of $210.4 million (-0.3% YoY, guidance: $204.6 million) and adjusted EPS of $0.51 (guidance: $0.38). The positive market reaction was observed despite a 5% YoY decline in revenue in the key integrated circuits segment to $147.8 mln, as this decline was fully offset by a 14% YoY increase in revenue in the flat panel display division to $62.6 mln. Additional support for the quotations was provided by the decision of the Board of Directors to increase the share buyback program by another $25 mln.

-J.M. Smucker (SJM: -4.4%) reported first-quarter adjusted earnings per share of $1.9 with a consensus of $1.93. Profitability was pressured by rising production costs, primarily due to a sharp increase in tariffs on imported green coffee, which resulted in a net loss of $43.9 million. Although the full-year revenue growth guideline was raised to 3-5% YoY, investors were disappointed by the lack of improvement in earnings guidance, which triggered the selloff.

This article was AI-translated and verified by a human editor