Asian stock markets opened on a downward trend following a lackluster performance on Wall Street. Investors are keenly awaiting Nvidia Corp.’s earnings report, looking for insights on whether the enthusiasm for artificial intelligence that has fueled the recent bull market will continue.

In Japan and Australia, equity benchmarks dipped on Wednesday, while futures for US stocks also traded lower. The tech sector’s weak sentiment, exacerbated by disappointing results from Chinese e-commerce giant PDD earlier in the week, could persist as traders brace for Nvidia’s financial disclosures post-Wednesday’s session.

With Nvidia—a $3.2 trillion behemoth—set to announce its earnings, investors are preparing for significant volatility. Options market activity suggests a nearly 10% swing in either direction following the report. Nvidia’s stock has already surged about 160% this year and skyrocketed 1,000% from its bear-market low in October 2022.

Chris Senyek of Wolfe Research shared his cautious optimism ahead of a critical US payrolls report due on September 6. “We remain bullish, but risks are now skewed to the downside over the very near-term,” he commented. He also noted that the current period is seasonally weaker, a trend that intensifies during election years.

Meanwhile, Bitcoin slid below the $60,000 mark early Wednesday amid a broader cryptocurrency market retreat, which also saw a steep drop in Ether, the second-largest token. In contrast, oil prices rose after a decline on Tuesday ended a three-day rally.

On Tuesday, the S&P 500 inched up to around 5,625, while the Nasdaq 100 climbed 0.3%. A key index tracking chipmakers advanced by 1.1%, with Nvidia itself gaining 1.5%.

US Treasuries opened higher in Asian trading after 10-year yields increased by one basis point on Tuesday to reach 3.82%. A well-received $69 billion auction of two-year notes also bolstered sentiment. Australian bond yields remained steady ahead of the country’s monthly inflation data.

Wall Street is currently grappling with uncertainties surrounding Federal Reserve policies, economic conditions, and the upcoming US presidential election. Yet, one constant remains: investment in artificial intelligence continues to be crucial.

Recent concerns about the returns on AI investments triggered a tech selloff, but this dip was quickly bought up. AI hardware and chip companies have led the recovery of the Nasdaq 100 from its August low, with Nvidia up roughly 30%.

Nvidia’s significant influence—accounting for over 6% of the S&P 500’s market cap—means that its performance heavily impacts market trends and momentum. Matt Stucky of Northwestern Mutual Wealth Management told Bloomberg Surveillance that if Nvidia fails to impress or merely meets expectations, it could create a risk-off environment rather than spurring sector rotation.

Analysts are generally optimistic, forecasting Nvidia will project over 70% revenue growth for the current quarter, with some even expecting higher numbers. These results will also provide crucial insights into AI spending trends across the broader tech industry.

Economic data showed US consumer confidence reached a six-month high in August. Positive perceptions of the economy and inflation outweighed declining optimism about the labor market.

Although the S&P 500 is nearing its all-time high following Federal Reserve Chairman Jerome Powell’s recent dovish remarks, underlying risk premiums remain somewhat elevated compared to pre-July correction levels. The once-dominant “AI” narrative has yet to fully recover, according to Jonas Goltermann at Capital Economics.

Goltermann remains optimistic: “Provided that the US economy manages a soft landing, as we continue to anticipate, and enthusiasm around AI rebounds further, we forecast the S&P 500 will hit 6,000 by the end of the year.”