MW Can Nvidia earnings rally the stock market and stop the bleeding in tech?

By William Watts

Highflying "Magnificent Seven" tech stock are in correction territory. Investors are watching Nvidia's results to assess tech exposure.

Over to you, Nvidia Corp.

The chip giant and pearl of the artificial-intelligence-fed megacap tech rally reports earnings after the closing bell Wednesday. Investors are looking to it as a catalyst that could stop the bleeding in the tech sector and perhaps revive a broader stock market rally that has stumbled in late February amid worries over the outlook for growth and trade.

"Nvidia is the bellwether and market-darling stock that is of vital importance to the broader markets. Its performance provides meaningful guidance for the broader market tone," said Chris Brigati, chief investment officer at SWBC, a San Antonio-based investment firm, in a note.

Option traders are implying Nvidia's share price may move up or down by 9% from Wednesday's open to close of play on Friday, according to a MarketWatch analysis of FactSet data, a level of volatility that has large implications for the broader market.

Brigati contends that Nvidia's results could be more important to the market's near-term direction than the Friday release of the January personal-consumption expenditures index, the Federal Reserve's preferred inflation gauge.

While the broader market has slipped over the past week, with the S&P 500 SPX posting a fourth straight decline on Tuesday to close 3.1% below its record finish from Feb. 19, tech stocks have been hammered - putting even more emphasis on Nvidia earnings than usual. The Roundhill Magnificent Seven ETF MAGS, which tracks Nvidia and the six other megacap giants that benefited most from the AI-inspired rally in 2023 and 2024, fell into correction territory Tuesday, ending more than 11% below its record finish on Dec. 17.

What Nvidia has to say about demand for its range of new Blackwell AI chips could be a catalyst that will determine the direction of the market over the next few weeks, Mary Ann Bartels, chief investment strategist at Indianapolis-based Sanctuary Wealth, told MarketWatch in a phone interview.

See: Nvidia's stock has gone nowhere for months. What can give it a jolt?

As the S&P 500's performance indicates, other sectors have been playing catch-up in 2025. The broader rotation is seen as welcome, but tech and tech-related stocks still make up 33% of the S&P 500's value - roughly where it was at the peak of the dot-com bubble in 2000, noted Simeon Hyman, ProShares global investment strategist, in a phone interview.

While there are important differences, with the sector this time around supported by much stronger fundamentals, tech is still a large chunk of the market and "it is not cheap," Hyman said.

Investors should look at Nvidia earnings "as a moment to think about whether their portfolios are properly diversified," he said.

Investors looking to retain their exposure to core equities could look to soothe the risk of being overly concentrated in tech through ETFs, such as the ProShares S&P 500 Ex-Technology ETF SPXT, Hyman said. Other ex-technology ETFs also allow investors to reduce or avoid exposure to tech.

Check out: Ways to target - or avoid - Big Tech and megacap stocks via ETFs amid AI frenzy

Nvidia shares were up 4.6% amid earnings optimism ahead of midday Wednesday, while the S&P 500 rose 0.7% as it attempted to snap its four-day losing streak.

A strong report from the chip giant "could inject fresh confidence into the AI sector, lifting tech stocks and providing momentum for the broader market," said Nigel Greene, chief executive of U.K. financial advisory firm deVere Group, in emailed comments.

"On the other hand, if investors react negatively due to expectations being too high, it could signal short-term turbulence but not a fundamental issue with Nvidia's business," he said.

-Jamie Chisholm contributed to this article.

-William Watts

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February 26, 2025 12:02 ET (17:02 GMT)

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