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“Software is eating the world, but AI is going to eat software.” – Jensen Huang, May 2017
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Futures have been moving higher all morning, and both the S&P 500 and Nasdaq are indicated to open firmly higher. Treasury yields are modestly lower, with the 10-year yield still at 4.65%, while crude oil falls over 2% to $101.80. Gold is basically flat, and Bitcoin is up 1% to $77,500.
Overnight, Asia was lower across the board with the Nikkei down 1.2%, while other countries in the region were down by smaller amounts. In Europe, the tone has been more positive with the STOXX 600 up 0.4%, led higher by a 0.7% gain in France. The gains have been fueled by reports that the EU has reached a trade agreement with the US to sidestep additional tariffs.
There’s no data on the calendar today, but we will hear from a few Fed speakers before the main event after the close when Nvidia (NVDA) reports results. While the company’s embrace of AI has been a major contributor to the stock’s rally, we were struck by the quote above regarding AI and software. AI’s impact on software may have only been realized by the market in the last six months or so, but Jensen Huang was warning of its impact all the way back in 2017!
Just given its roughly 7.5% weight in the S&P 500, how NVDA reacts to earnings will have a material impact on the market’s performance tomorrow. NVDA has been on a roll heading into the report as the stock rallied more than 33% off its March low and closed yesterday more than 11% above its 50-day moving average (DMA).
You’ve probably heard people saying, “as goes Nvidia, so goes the market,” and while the magnitude of the stock’s move has been larger than the S&P 500, the patterns of the two over the last two years have been remarkably similar.
Since the launch of ChatGPT, NVDA’s relative strength versus the S&P 500 has followed a steady upward trend with periods of sharp outperformance followed by periods of consolidation. After trading sideways versus the market for nearly a year, since the March low, the stock appears to be attempting a new leg of outperformance. How the stock reacts to today’s earnings report could go a long way in determining if the latest attempt is successful.
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