How an Earnings-Fueled Move in Nvidia’s Stock Price Could Affect the Broader Market

Ahead of Nvidia’s (NVDA) highly anticipated earnings report after the bell Wednesday, investors may be bracing for significant share movement following the announcement that could affect major indexes and exchange-traded funds (ETFs).

Given rising expectations for Nvidia’s financial results, Susquehanna analysts warned Nvidia may need “at least a $1.5B beat” for a muted share price reaction, suggesting a large reaction could be likely, with options trading activity suggesting traders could be expecting shares to move 10% in either direction.

Firstrade President Don Montanaro told Investopedia that the online brokerage for retail traders has seen options trading clients expecting a near-term pullback after the earnings announcement.

Nvidia’s Recent Earnings Reports Were Followed By Steep Stock Swings

A significant movement in Nvidia’s stock price before and after an earnings report was released has been the norm in recent quarters.

Nvidia shares had dropped ahead of the company’s previous earnings report in February and gained more than 9% in extended trading after results beat estimates. The earnings announcement sent Nvidia’s market capitalization above $2 trillion in the following days.

In the year-ago period, Nvidia shares had surged more than 20% in extended trading after the company reported an earnings beat.

Nvidia Stock Move Could Affect the S&P 500, Nasdaq 100, and More

Nvidia’s growing influence in major indexes and exchange-traded funds could mean that a big move in its stock price would have an effect on the broader market.

The chipmaker, which has a market cap of around $‪2.3 trillion, carries significant weight on the S&P 500 and the Nasdaq 100. Nvidia makes up around 5.5% of the S&P 500, making it the third-heaviest company by weight in the index, after only Microsoft (MSFT) at roughly 7% and Apple (AAPL) at less than 6%, as of the start of May.

Nvidia has a weighting of around 6.5% of the Nasdaq 100, after Microsoft at 8.6% and Apple at 8%, reflected in the holdings of the Invesco QQQ ETF (QQQ), an ETF mirroring the index.

So far this year, Nvidia shares have significantly outperformed both the S&P 500 and the Nasdaq 100, with Nvidia shares nearly doubling in value while the S&P 500 and Nasdaq gained about 11% in the same period.

Semiconductor Industry ETFs Heavily Exposed to Nvidia

A significant move in Nvidia’s stock price could also affect many ETFs, such as semiconductor ETFs like the VanEck Semiconductor ETF (SMH) and iShares Semiconductor ETF (SOXX).

Nvidia makes up over 20% of the VanEck Semiconductor ETF, making it the heaviest-weighted company in the ETF, followed by Taiwan Semiconductor Manufacturing Company (TSM) at nearly 13%. Nvidia has a 9% weight on the iShares Semiconductor ETF, followed by Broadcom (AVGO) at 8% and Qualcomm (QCOM) at less than 7.5%.

As Nvidia shares have nearly doubled since the start of 2024, the VanEck Semiconductor ETF gained more than 34% and the iShares Semiconductor ETF rose over 22%.

Nvidia shares were about 1.5% lower at $940.50 around 1:50 p.m. ET Wednesday ahead of the chipmaker’s earnings report set for after the bell.