Market Volatility and Nvidia's Earnings Outlook

On August 5, the market experienced a significant downturn. Japanese stocks, typically robust, plummeted by 12%, marking their steepest decline since 1987. However, there was no underlying issue. The strength of the yen compelled investors to inject additional capital, leading to margin calls globally.

Europe initiated the decline, closely followed by the U.S. The Magnificent Seven—Apple, Amazon, Alphabet, Meta, Microsoft, and Nvidia—all saw declines. Nvidia dropped 6.4%, casting doubt on its trillion-dollar status. Buffett divested half of his Apple shares, despite recent accolades.

Both Nvidia and Apple experienced sharp drops before partially recovering. This indicated a lack of confidence in the stocks, rather than the companies themselves. The media attributed the situation to overvaluation and uncertainty regarding the Federal Reserve's interest rates.

This week, Nvidia is set to report earnings. Anticipate a $2 billion surprise and reassurance regarding the Blackwell chip platform. Analysts expect a robust tone and detailed financial information. Nvidia may announce a substantial share buyback, underscoring its financial stability.

Apple is shifting from hardware to software and service fees. Their collaboration with Microsoft-backed OpenAI is pivotal. Apple could potentially profit without directly developing AI products. This could be transformative, altering perceptions of Apple's earnings.