Nvidia Earnings Loom as Markets Trade Muted

Wall Street holds its breath for Nvidia's results as sticky inflation and rising bond yields weigh.

As of midday August 26, the S&P 500 was roughly flat, the Nasdaq Composite slipped, and the Dow traded lower as investors digested sticky inflation data. According to The Motley Fool, energy and industrial stocks led sector gainers while basic materials and healthcare trailed. The muted trading reflects caution ahead of Nvidia's after-hours earnings report.

The Motley Fool reports that July PCE inflation data came in slightly above expectations, with prices rising 3.7% year-over-year. CNN notes that bond yields have climbed throughout the year, driven by government deficit concerns and corporate bond supply for the AI buildout. The 10-year Treasury yield sits near its highest in over a year.

CNBC reports that Nvidia is expected to post earnings of $2.10 per share on $92.17 billion in revenue for its fiscal second quarter. Wall Street expects third-quarter guidance of $2.38 per share on $104.2 billion in revenue, an 83% jump year-over-year. The Motley Fool notes Nvidia may post over $100 billion in quarterly revenue for the first time.

According to CNBC, Nvidia's top customers including Amazon, Alphabet, Tesla, and SpaceX all reported negative free cash flow in the second quarter, while Meta's cash generation dropped about 90%. Goldman Sachs expects hyperscaler AI infrastructure spending to reach $1.2 trillion in 2027. The companies are raising historic amounts of capital to fund buildouts.

CNN reports that a 'disorderly rise in bond yields' is the second biggest risk for stocks after the AI bubble, according to a Bank of America survey. The 30-year Treasury yield remains near its highest in nearly two decades. CFRA Research's Sam Stovall identified 5% on the 10-year yield as the psychological 'line in the sand' for investors.

Nvidia's earnings call at 5 p.m. ET will be closely watched for signals on AI demand sustainability and Vera Rubin chip ramp-up. CNBC reports that Jensen Huang will join CNBC's Jim Cramer at 6 p.m. ET. The Motley Fool notes that even $100 billion in revenue may not ease investor jitters about the massive capital outlay in AI infrastructure.