S&P 500 notched a record high close on Wednesday ahead of 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, bounced between gains and losses before ending down 0.1 percent ahead of the report, due after the market closes.
With Nvidia making up about 8 percent of the S&P 500, its financial results affect vast numbers of 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 were mixed, with Microsoft gaining nearly 1 percent and Meta Platforms dipping almost 1 percent. They, along with Alphabet and Amazon, are among Nvidia’s biggest customers.
Enthusiasm for companies related to AI has fueled big gains in technology stocks. The S&P 500 now trades at over 22 times expected earnings, its highest price-to-earnings ratio in four years, according to LSEG.
Concerns about the pace of the AI rally increased last week after OpenAI CEO Sam Altman warned of a potential AI bubble.
Nvidia options implied a roughly 6 percent swing for the shares in either direction following the results.
Investors will closely watch the impact of the Sino-US trade war on Nvidia’s China business earlier this year, along with the effect on forecasts from its recent revenue-sharing deal with the US government.
The S&P 500 climbed 0.24 percent to end the session at 6,481.40 points, exceeding its previous record high close on August 14.
The Nasdaq gained 0.21% to 21,590.14 points, while the Dow Jones Industrial Average rose 0.32% to 45,565.23 points.
