Stocks to Watch in August

Stocks enter August halfway through second-quarter earnings season and amid a notable break with the dominant market trends of the last year and a half.

Tech stocks, led by the Magnificent Seven, carried the S&P 500 to record highs in early July before a tame inflation report changed everything. The Mag Seven slipped into a correction later in the month as investors sold off tech stocks on fears of slowing growth, overbought conditions, and unsustainable spending on artificial intelligence.

Meanwhile, the small-cap Russell 2000 soared as investors bet on the companies that could benefit most from interest rate cuts, the first of which the Federal Reserve is widely expected to make in September.

Below, we look at five companies with events coming up in August that could be catalysts for big stock moves.

Nvidia

Nvidia (NVDA) will report earnings late in the month, and the results are likely to have implications for the broader market.

Nvidia has more than a year of the AI boom under its belt, meaning the chipmaker’s year-over-year comparisons are set to become more challenging. Top and bottom line growth are both expected to have declined in the most recent quarter to their slowest pace since early 2023, according to consensus analyst estimates compiled by Visible Alpha. Even so, revenue and profit are each forecast to have more than doubled from last year. 

Nvidia’s stock, like its Magnificent Seven peers, has lost some of its lustre in recent weeks amid a rotation out of big tech stocks into small caps. That rotation was spurred by a soft inflation report that boosted conviction the Fed will lower interest rates soon and, in turn, take pressure off smaller companies with floating-rate debt.

The tech sell-off picked up steam last week when an earnings report from Alphabet (GOOGL) raised concerns that cloud providers could be overspending on artificial intelligence. Results from Meta (META) and Microsoft (MSFT) allayed some of those fears this week, but another blowout earnings report from Nvidia could revive the narrative, putting more pressure on big tech stocks. On the other hand, it could breathe fresh life into the AI trade.

Walmart

Walmart’s (WMT) earnings will provide insights into the health of consumer finances. 

Americans, weighed on by inflation and elevated interest rates, are prioritizing value, a development that has forced retailers to slash prices en masse and fast-food chains to launch value menus in bids to retain customers. 

Walmart has been a rare beneficiary of this shift in consumer behavior. The retailer in May topped first-quarter sales and earnings estimates. The company’s revenue has been boosted in recent quarters by increased traffic from high-income shoppers feeling the pinch of higher prices. Persistent inflation and economic uncertainty have also driven Americans to dine out less in recent quarters, buoying Walmart’s massive grocery business.

Wall Street expects Walmart’s revenue growth slowed in the second quarter but remained above its pre-pandemic average. Earnings are also forecast to come in on the higher end of earlier guidance.

Home Depot

The second quarter is consistently Home Depot’s (HD) biggest, but the world’s largest home improvement retailer approaches its upcoming earnings report in a precarious position.

Revenue and profit have declined year-over-year in each of the last five quarters, and Wall Street expects that to be true of this past quarter as well. Years of elevated inflation have crimped consumers’ discretionary spending, putting pressure on sales of appliances and other big-ticket items. At the same time, elevated interest rates have chilled the U.S. housing market, leading homeowners to defer renovations and upgrades. 

Realtors and industry professionals had hoped this year’s spring homebuying season would reawaken the U.S. housing market, but that has not materialized. Existing home sales declined for a fourth consecutive month in June while new home sales slumped to their lowest level since November. 

But there’s hope on the horizon. Mortgage rates have declined in recent weeks, nudged lower by Wall Street’s increasing confidence that the Federal Reserve will begin cutting interest rates in September. Plus, housing inventory reached its highest level since 2008 in June, giving homebuyers plenty of options when they do return to the market. 

Investors and analysts will likely be focusing on Home Depot’s guidance for evidence that management, like Wall Street, sees the potential for home renovation and selling activity to pick up in the second half of the year.

CrowdStrike Holdings

CrowdStrike (CRWD) enters the month of August focused on damage control. 

The cybersecurity company sparked a global tech outage on July 19 when it rolled out a software update for Windows. The ensuing chaos, which disrupted airlines, banks, and health care, is expected to cost the Fortune 500 more than $5 billion. Delta Airlines (DAL), which estimates its losses from the fiasco total $500 million, is also reportedly preparing to sue the company and Windows maker Microsoft for outage-related damages.

CrowdStrike shares plunged more than 11% on the day of the outage and have continued to slide since then.

CrowdStrike is expected to report second-quarter earnings late in the month, and Wall Street is forecasting double-digit revenue and earnings growth. However, last quarter’s results could take a back seat on CrowdStrike’s earnings call as analysts focus on the outage and its impact on future earnings.

Paramount Global

Paramount’s (PARA) controlling shareholder National Amusements in July finally agreed to a merger with David Ellison’s Skydance Media after months of negotiation. 

The $8 billion deal, announced on July 8, includes a 45-day “go shop” period during which Paramount can solicit competing offers. The storied Hollywood studio received several competing offers during its back-and-forth with Skydance. Media mogul Byron Allen in January offered to buy the company’s outstanding shares for more than $14 billion. And in March private equity firm Apollo Management offered $11 billion to acquire the company’s film and television studio. 

It’s possible Paramount’s directors and controlling shareholder Shari Redstone just want this process to be over after more than half a year of acquisition talks. But the saga has been full of twists and turns—including when Redstone in June unexpectedly called off what was thought to be a done deal with Skydance—and another surprise could come in August.