Bengaluru — The S&P 500 climbed to a record high on Wednesday before quarterly results from Nvidia, Wall Street’s most closely watched event this week, which will test the rally that has pushed valuations of AI-related companies to levels that some investors view as too high.
Shares of Nvidia, the world’s most valuable company and the leading supplier of cutting-edge AI processors, were up 0.1% before the report, due after the market closes.
With Nvidia making up about 8% of the S&P 500, its financial results affect many Americans who use index investment funds to save for retirement.
“Nvidia is going to produce humongous revenue gains over the next nine months, on top of an already humongous revenue base,” said Jed Ellerbroek, portfolio manager at Argent Capital.
“Investors should prepare themselves for a world where Nvidia is a double-digit percentage of the S&P 500.”
Shares in tech and AI heavyweights Alphabet and Amazon, among Nvidia’s biggest customers, were near flat, while Microsoft rose 0.8% and Meta Platforms fell 1%.
Enthusiasm for companies related to AI has fuelled big gains in technology stocks. The S&P 500 now trades at more than 22 times expected earnings, its highest price-to-earnings ratio in four years, according to LSEG.
Concerns about the pace of the AI rally really increased last week after OpenAI CEO Sam Altman warned of a potential AI bubble.
Nvidia options implied an about 6% swing for the shares in either direction after the results.
Investors will closely watch the impact of the Sino-US trade war on Nvidia’s China business earlier this year, with the effect on forecasts from its recent revenue-sharing deal with the US government.
The S&P 500 was up 0.22% at 6,480.05 points, and it touched an intraday record high.
The Nasdaq gained 0.18% to 21,583.83 points, while the Dow Jones industrial average was up 0.31% at 45,557.67 points.
Eight of the 11 S&P 500 sector indexes rose, led by energy, up 1.34%, followed by a 0.46% gain in real estate.
Investors were also watching for developments related to US President Donald Trump’s attempt to fire Federal Reserve governor Lisa Cook, a move likely to face legal challenges.
If Trump succeeds, he would nominate a replacement to the central bank’s board who could be expected to back his policy preferences, challenging the central bank’s independence.
Investors are pricing in a 25-basis-point interest rate cut in September, according to data compiled by LSEG, with most big brokerages also leaning in that direction.
New York Federal Reserve Bank president John Williams said on CNBC it was likely interest rates could fall at some point but policymakers had to see upcoming economic data to decide if a rate cut was appropriate at the Fed’s September meeting.
MongoDB soared 35% after the software-maker raised its annual profit forecast. JM Smucker fell about 5% after the Jif peanut butter maker missed first-quarter profit estimates.
Advancing issues outnumbered falling ones within the S&P 500 by a 1.9-to-one ratio.
The S&P 500 posted 27 new highs and one new lows; the Nasdaq recorded 115 new highs and 28 new lows.
Reuters
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