Asian stocks experienced a downturn as traders keenly awaited Nvidia’s earnings report to assess the robustness of the AI market. Japan and Australia’s stock markets observed declines, mirroring a broader sense of anticipation. Nvidia, representing over 6% of the S&P 500’s market capitalization, became the focal point for investors. Recent US consumer confidence data revealed mixed economic sentiments, adding another layer of complexity to the market dynamics.

Asian markets opened lower following a lackluster performance on Wall Street. Investors are particularly focused on Nvidia Corp.’s upcoming earnings report, hoping to glean insights on whether the AI-driven market rally has more momentum. Equity benchmarks in Japan and Australia saw slight declines on Wednesday, while futures contracts for US shares also trended downwards. The tech sector’s sentiment was already fragile due to earlier disappointing results from Chinese e-commerce giant PDD.

The stakes are high for Nvidia as it gears up to announce its earnings. The options market suggests a potential 10% fluctuation in Nvidia’s share price post-earnings report. Remarkably, Nvidia’s stock has surged approximately 160% this year and an astonishing 1,000% since hitting a bear-market low in October 2022.

Chris Senyek from Wolfe Research indicated that while they remain optimistic about the market’s trajectory, short-term risks appear skewed to the downside, especially as we approach the critical US payrolls report on September 6. He also noted that the market enters a historically weaker period, further amplified during election years.

In other financial markets, Bitcoin fell below the $60,000 mark early Wednesday amid a broad cryptocurrency market decline, which also saw a significant drop in Ether, the second-largest token. Meanwhile, oil prices rose after slipping on Tuesday, ending a three-day rally.

The S&P 500 inched higher to around 5,625 on Tuesday, with the Nasdaq 100 gaining 0.3%. A notable index tracking chipmakers increased by 1.1%, with Nvidia itself rising by 1.5%.

In the bond market, Treasuries opened higher in early Asian trading sessions after 10-year yields increased by one basis point on Tuesday to reach 3.82%. A $69 billion US sale of two-year notes was well-received by investors. Australian bond yields remained steady ahead of the country’s monthly inflation data release.

Amid ongoing uncertainties regarding Federal Reserve policies, economic conditions, and the US presidential race, one trend remains clear: investments in AI continue to be a crucial factor on Wall Street. Recent concerns about the returns on these investments led to a tech selloff, but this dip was quickly bought up. AI hardware and chip companies have been instrumental in leading the Nasdaq 100’s recovery from its August lows, with Nvidia up about 30%.

Nvidia’s significant role in the S&P 500 means its performance can greatly influence overall market trends. Matt Stucky from Northwestern Mutual Wealth Management emphasized that Nvidia’s failure to meet expectations could lead to a risk-off environment rather than drive a sector rotation.

Analysts anticipate Nvidia will project over 70% revenue growth for the current quarter, with some expecting even higher figures. The company’s results will serve as an important indicator for AI spending trends across the technology industry.

On the economic front, recent data indicated that US consumer confidence reached a six-month high in August. This uptick was driven by more positive views on the economy and inflation, which balanced out growing concerns about the labor market.

While the S&P 500 is nearing its all-time high following Federal Reserve Chair Jerome Powell’s dovish remarks, underlying risk premiums remain elevated compared to pre-July correction levels. Jonas Goltermann from Capital Economics suggested that if the US economy manages a soft landing and enthusiasm for AI continues to grow, the S&P 500 could reach 6,000 by year-end.