NVIDIA’s earnings matter a lot for the market — just not quite as much as before.
The chip maker is expected to contribute 12.5% to the S&P 500’s year-over-year earnings growth on a dollar basis, when looking at FactSet estimates for the latest quarter. That would make for its smallest rate of contribution in a year, according to data provided by FactSet Senior Earnings Analyst John Butters.
Without Nvidia’s contributions, the S&P 500 would be expected to have grown earnings 24.5% in the latest quarter, versus the 27.7% projected growth rate when factoring in projected Nvidia results. That’s a gap of 3.2 percentage points. For contrast, in the prior quarter, the difference was 2.7 percentage points.
Nvidia is still projected to be the biggest single contributor to S&P 500 earnings growth, according to Jonathan Golub, chief equity strategist at Seaport Research.
But now, Nvidia has a bit of company in the chip sector when it comes to propping up index-level earnings growth: Micron Technology is expected to be the second-largest contributor, Golub noted. The FactSet data showed that S&P 500 earnings projections would be 2 percentage points lower without the estimated contributions from Micron, which has benefited from soaring memory prices that have lifted profits.
In absolute terms, the FactSet consensus calls for $1.75 in earnings per share from Nvidia, up 116% from a year before. Analysts are looking for Micron to grow adjusted earnings per share by a whopping 916%, to $19.41, although the memory-chip maker and its profit pool are smaller in dollar terms.
Nvidia’s Wednesday afternoon earnings report will come on the heels of a hot recent run for the stock, even as its shares have trailed those of other chip makers, like Advanced Micro Devices and Intel, so far this year.
There are various concerns dogging investors. Wall Street has remained worried about the sustainability of hefty artificial-intelligence spending, as well as how companies like Nvidia are dealing with shortages of memory chips and manufacturing capacity. The competitive landscape is another sticking point. Investors will look for visibility into further big gains for Nvidia even as new types of chips catch on more with customers.
For now, the company has a nice cushion to lean on: Capital expenditures for Nvidia’s Big Tech hyperscaler consumers have crept into the neighborhood of $700 billion.
Analysts will also be focused on any updates to Nvidia’s sales forecast from its Blackwell chips and its Rubin AI system, and its data-center processor business more broadly. The company has outlined visibility into $1 trillion in such sales through next year.
Furthermore, investors will be listening for updates on Nvidia’s capital-return strategy. While many hyperscalers are cutting down their stock-buyback activity in the wake of heightened AI spending, Nvidia is on the receiving end of those AI dollars and could dole some more out to shareholders.
UBS analyst Timothy Arcuri thinks it’s possible Nvidia could deliver a new share-repurchase commitment that nears $150 billion over the next year. “Additionally, many investors we speak with are pushing for a much larger dividend commitment — which we think the market would like because it will further broaden the shareholder base,” he wrote.
Nvidia’s stock currently yields 0.02%.
“While investor interest here is always obviously high, we sense a marked apathy on this stock even among most big [long-only funds] — so the setup for a good set of numbers and potentially positive news on capital return is a good one,” Arcuri said.
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