Chips aren't down: $240 billion rally great, but is it good enough?

With Nvidia's shares at record highs, its getting harder for investors to gauge how even potentially blowout earnings can push the stock higher.

The world's most valuable chipmaker is expected to clear a high hurdle with its post-market release Tuesday just as it did in the previous two quarters with no signs of a slowdown in demand for its artificial intelligence computing chips.

Given its 245% gain this year, the stock has little room for error. This was illustrated in August when Nvidia saw the boost from a stellar earnings report fade, as S&P 500 index gains lost steam in the days following. "In the near term, great isn't always good enough," said Julian Emanuel, chief equity and quantitative strategist at Evercore ISI.


Nvidia's performance has become critical for the market-capitalisation weighted S&P 500 Index. The stock accounts for nearly 15% of the gauge's 2023 rally meaning a big earnings miss could have significant consequences.

After punching above the $500-per-share level to close at a record high on Monday, the chipmaker has a market value of $1.25 trillion, giving it the fifth-biggest weighting in the S&P 500 at 3.3%. In the run-up to the results Nvidia has added nearly $240 billion in value this month.

Dan Morgan, senior portfolio manager at Synovus Trust , acknowledges it's getting harder for Nvidia to impress investors. "Everybody expects great news, everybody expects them to beat and raise," he said. "Even if they do that, that's what everybody expected." Bloomberg