Asian equity markets experienced a downturn on Wednesday, mirroring a lackluster performance on Wall Street. Investors are bracing themselves for a wave of earnings reports that could significantly influence risk assets moving forward.

Most key indices across the Asian region posted losses, with a notable decline in Hong Kong’s tech stocks index for the second consecutive day. Meanwhile, the yield on two-year U.S. Treasury bonds, which closely tracks changes in interest rate policies, dropped by four basis points during early Asian trading hours.

Market participants are eagerly awaiting Nvidia Corp.’s earnings report to gauge whether the current enthusiasm for artificial intelligence (AI) stocks has further momentum. Nvidia, the world’s most influential stock in the AI sector, is anticipated to set the tone. This anticipation follows a week of weak sentiment in the tech sector, partly due to disappointing earnings from Chinese e-commerce giant PDD Holdings Inc. Other major Chinese firms like Cnooc Ltd., BYD Co., and Meituan are also scheduled to release their earnings on Wednesday.

Jun Rong Yeap, a market strategist with IG Asia Pte., emphasized the high stakes: “Nvidia’s results will be pivotal for global markets given the extreme optimism surrounding AI stocks over the past year. The current high share price suggests strong expectations, but any negative surprises could trigger significant sell-offs.”

In other corporate news from Asia, China’s leading automaker BYD announced its intention to boost overseas deliveries to nearly half of its total sales. This move indicates a strategy to establish global production hubs to circumvent high tariffs.

In Japan, shares of Sony Group Corp. surged by as much as 2.7% after the company announced a price increase for its PlayStation 5 in its home market. Conversely, shares of Seven & i Holdings Co., the operator of 7-Eleven stores, fell as it sought regulatory designation, potentially complicating any future takeover attempts.

Turning to other markets, Bitcoin fell below the $60,000 mark early on Wednesday amid a broader retreat in the cryptocurrency market, which also saw a sharp decline in Ether, the second-largest cryptocurrency.

Oil prices saw an uptick on Wednesday after ending a three-day rally in the previous session. Conversely, gold prices retreated following a three-day rise that brought them close to their all-time high.

In economic news, U.S. consumer confidence reached a six-month high in August, driven by more positive views on the economy and inflation that offset declining optimism about the labor market. The Australian dollar also strengthened after the country’s July inflation data exceeded expectations.

With ongoing uncertainties surrounding Federal Reserve policies, the state of the economy, and the upcoming U.S. presidential election, one thing remains clear: investment in AI continues to be crucial on Wall Street. Chris Senyek of Wolfe Research noted that while they remain optimistic about the market, risks are skewed towards the downside in the very near term, particularly as we enter a seasonally weaker period intensified by election year dynamics.

Investors are gearing up for significant volatility in Nvidia’s stock after the company releases its earnings report. The options market suggests a potential move of nearly 10% in either direction following the results. Nvidia’s stock has already surged approximately 160% this year and has climbed 1,000% since hitting its bear-market low in October 2022.

Analysts predict that Nvidia will report revenue growth exceeding 70% for the current quarter, with some expecting even more substantial gains. Nvidia’s performance and future projections will serve as a critical indicator for AI investment trends across much of the technology sector.