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Nasdaq 100 Forecast: Room to Run if NVDA Earnings Beat?

Article By: ,  Head of Market Research
May 22, 2024 5:39 PM

NDX, NVDA Key Points

  • Nvidia is expected to report $5.18 in EPS on $22.9B in revenue, but the company’s outlook for the rest of the year will be even more significant.
  • Options markets are implying a +/- 8% move in NVDA on the release, equivalent to the total market value of McDonald’s (~$190B)
  • All eyes are on the $960 level in NVDA stock.

As of writing on midday Wednesday, the Nasdaq 100 is poised to close slightly higher for the 3rd straight day, potentially marking its 3rd record high to start the week. One way or another, the placid trading conditions we’ve seen so far this week aren’t likely to last through the end of the week.

Nvidia, the semiconductor manufacturer that has become the proverbial face of the AI revolution, reports earnings after the bell today. As usual, the company is expected to report stellar results over the last quarter: analyst consensus estimates are for the company to report $5.18 in EPS on $22.9B in revenue, but with shares up a staggering 20% in the last month alone, traders will be more interested in CEO Jensen Huang’s outlook for the rest of the year and beyond.

In addition to the raw numbers, investors will be keen for updates on the company’s Blackwell Graphical Processing Units (GPUs). The new chip is slated for release in the second half of the year and already has a backlog of orders from tech behemoths like Microsoft and Amazon.

Traders expect an outbreak of volatility in NVDA after the release, with options markets implying a +/- 8% move on the results. For reference, a move that large in a stock as big as Nvidia would represent the chipmaker either gaining or losing value equal to all of McDonald’s market capitalization (~$190B). Beyond NVDA itself, the results will also have spillover impacts to the entire “AI Revolution” trade, which is broadening out to encompass a significant portion of the overall stock market; according to a Goldman Sachs report published last week, 41% of S&P 500 companies mentioned AI in their earnings, up from 23% last year.

Nasdaq 100 Technical Analysis – NDX Daily Chart

Source: TradingView, StoneX

Looking at the Nasdaq 100, which features a ~4% allocation to NVDA, the trend remains undeniably bullish. Since breaking above 18,400 resistance to fresh record highs last week, the index has held that key level and continued to grind higher. As long as Nvidia’s earnings and outlook don’t come in substantially worse than expectations, traders will view any dips into the mid-18,000s as buying opportunities on the way to a potential continuation toward 19,000+.

Nvidia Technical Analysis – NVDA Daily Chart

Source: TradingView, StoneX

As my Dad would say, “it doesn’t take a rocket surgeon” to identify the key level to watch on NVDA: The stock has been consistently capped by resistance at $960 going back to early March. As we go to press, NVDA is coiling just below that level, so a breakout or another rejection is likely in the wake of the earnings report.

The cleanest technical setup would be a clear breakout to record highs, in which case a move through $1,000 would be highly likely, and a rally toward $1100 could come into play sooner rather than later. If we instead see a bearish reaction to earnings, traders will be watching support at $900 and the 50-day EMA ($870) as logical first targets to the downside.

-- Written by Matt Weller, Global Head of Research

Check out Matt’s Daily Market Update videos on YouTube and be sure to follow Matt on Twitter: @MWellerFX

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