A wobble in US technology shares has raised the stakes for Nvidia’s quarterly results on Wednesday, with earnings from the semiconductor giant posing a crucial test for the scorching AI trade.

The heavyweight tech sector slumped 1.6% on the week after a huge run for the group, dragging on key indexes. The sector’s weekly decline moderated on Friday as stocks broadly rallied after comments from US Federal Reserve chairman Jerome Powell appeared to pave the way for imminent interest rate cuts.

Fuelled by its dominant artificial intelligence products, Nvidia’s massive share price gains have buoyed both the tech sector and the overall market in recent years. Last month, Nvidia became the first company to top US$4-trillion in market value.

Investors are now more “on edge” heading into Nvidia’s results, said Matthew Maley, chief market strategist at Miller Tabak. “When the group goes down and the most important stock in the group reports earnings, that is going to have a bigger impact than usual,” Maley said.

Nvidia’s stock has climbed more than 30% so far in 2025, pushing its gain to over 1 400% since October 2022. The California-based company has epitomised the broader AI excitement that has driven up shares of a raft of tech companies and others involved in AI infrastructure such as power generation and cooling systems.

“Nvidia is almost looked at as a proxy to what is happening in artificial intelligence,” said Matt Orton, chief market strategist at Raymond James Investment Management. “There’s definitely a read-through that happens to the broader AI trade, which has really been the main driver of the S&P 500’s return this year.”

Warning signs

Analysts said possible reasons for recent tech stock weakness include cautionary AI industry developments, including comments from OpenAI CEO Sam Altman that investors may be getting overexcited about AI. Also, a study from researchers at the Massachusetts Institute of Technology cast doubt on returns from AI investments.

Nvidia’s results will close out a second-quarter US corporate earnings season that has largely surpassed expectations and helped support equities. S&P 500 company earnings are on track to have climbed 12.9% from the year-earlier period, up from an expected 5.8% rise on 1 July, according to LSEG IBES.

Read: AI gold rush propels Nvidia to record $4-trillion market cap

Goldman Sachs strategists pointed to particular earnings strength so far for the “Magnificent Seven” — the group of megacap companies that includes Nvidia as well as Apple and Microsoft. Including estimates for Nvidia, the Magnificent 7 are on track to have increased earnings by 26% compared with 7% for the remaining 493 stocks in the index, the Goldman strategists said in a note.

Nvidia is expected to post a 48% rise in earnings per share on revenue of $45.9-billion for its second fiscal quarter, according to LSEG data.

Megacap tech companies focusing on AI have recently increased their estimates for capital spending, which should be favourable for Nvidia, said Paul Roach, portfolio manager at Allspring Global Investments.

Nvidia’s “commentary on the demand side … should be more bullish just because their largest customers have all kind of upped their capex guidance over the last few quarters”, Roach said, adding that demand for Nvidia’s products is also broadening beyond the largest tech companies

Investors will also focus on US economic data in the coming week, including on consumer sentiment and inflation.

Despite the latest tech declines, the S&P 500 eked out a gain on the week and is up about 10% this year, around record-high levels. The Dow Jones Industrial Average notched a record high close on Friday.

As tech shares fell this week, some investors rotated into other areas of the market that have not been as strong in recent weeks, such as healthcare and consumer staples.

But major equity indexes will be hard-pressed to keep moving higher if tech falters, given its heavy presence in those indexes, Maley said. Tech is by far the largest of the S&P 500’s 11 sectors, with a 33% weight. Nvidia alone has a nearly 8% weight in the index.

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