Last week belonged to Jerome Powell and his hint at rate cuts. This week, Wall Street is turning its attention to Nvidia (NVDA). Investors are treating the company’s second-quarter earnings as a make-or-break moment for the stock rally.
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Powell’s comments about a cooling job market and tariff risks rattled bonds and opened debate on whether lower rates signal strength or weakness. This debate now flows directly into Nvidia’s results, because they will show whether the AI boom is still carrying the market.
Nvidia Holds the Market’s Undivided Attention
Nvidia’s dominance in AI chips is not in question. With an 80 percent share of the market and heavy exposure to Microsoft (MSFT), Amazon (AMZN), Meta (META), and Alphabet (GOOGL), its results will serve as a litmus test for big tech spending. Nearly 60 percent of capital spending at those giants is now tied to AI. Nvidia’s sales outlook will either confirm that trend or challenge it.
The sheer size of Nvidia makes this even more critical. The company’s $4.3 trillion valuation represents about 8 percent of the entire S&P 500 (SPX). That means whatever Nvidia says will ripple across indexes, ETFs, and portfolios everywhere.
Tech Rally Faces a Reality Check
The broader backdrop is more complicated. Stocks jumped on Powell’s dovish tone but gave back gains as investors questioned the reason behind it. If rates fall because growth is weak, earnings could follow lower. And if cuts stoke inflation, the benefits fade quickly.
That puts extra pressure on megacap tech, which already makes up a third of the S&P 500’s value. If Nvidia falters, the ripple could test the rally that has carried markets all year. RBC strategist Lori Calvasina warned that without stronger GDP forecasts, analysts may not raise earnings estimates for tech leaders.
Expectations Could Be Too High
Nvidia is up nearly 30 percent this year and has added more than $1 trillion in value over the past twelve months. This leaves little room for mistakes. As Saxo Bank strategist Jacob Falkenscone put it, “If growth slows or margins disappoint, the downside could be sharp.”
Investors also worry about competition and regulation. Nvidia’s market lead is vast, but in tech, dominance can erode quickly. Any sign of slowing sales or tighter margins could shake confidence.
What Comes Next
Earnings arrive Wednesday after the close. Between now and then, the market will keep debating whether Powell’s words or Nvidia’s numbers matter more. In reality, both carry weight, but Nvidia’s update may prove more decisive for the near-term direction of stocks.
If the company delivers, the AI trade may roar back to life. If it falls short, investors could be forced to rethink the rally that has defined 2025.
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