Big Tech’s earnings season is wrapping up with a bang: Nvidia Corp., at the center of the artificial intelligence frenzy, is reporting results that could set the tone for global stock markets for the rest of the year.

The chipmaker has added more than US$370 billion in market value since its last update, and is the biggest contributor to the Nasdaq 100’s 36 per cent rally this year. Nvidia’s processors are the picks and shovels in the AI gold-rush that has fueled markets this year, making its report much more significant than a typical earnings release.

“What Nvidia says about guidance for the remainder of FY24 drives the sentiment around the entire AI thesis that has driven the market,” said Ben Reitzes, an analyst with Melius Research.

The chipmaker’s Wall Street cheerleaders are expecting more good news.

Analysts have been raising price targets ahead of the second-quarter report, which is expected to show revenue up 65 per cent from the same period a year ago to about $11 billion, data compiled by Bloomberg shows. According to Citigroup, expectations from institutional investors are even higher, at around $12 billion.

And many analysts, like HSBC’s Frank Lee, say the stock has further to run — despite more than tripling this year to trade at a whopping 44 times projected profits.

“Although market expectations have clearly risen for Nvidia and the overall AI supply chain, we expect bullish AI server momentum continued to surpass market expectations,” Lee wrote in a research note on Monday, arguing that the long-term earnings potential still isn’t reflected by Nvidia’s stock price.

As one of just a handful of companies worth more than $1 trillion, Nvidia’s share-price move after earnings has the potential to take the entire S&P 500 with it. Options market activity is implying a 10 per cent swing in the stock price on the day after the report, according to data compiled by Bloomberg.

Inevitably, other stocks exposed to AI — heavyweights like Alphabet Inc. and Microsoft Corp. and smaller companies like Palantir Technologies Inc. — will see the biggest impact. But the report is important for markets outside the U.S. — for stocks like Nvidia supplier Taiwan Semiconductor Manufacturing Co. and chip equipment giant ASML Holding NV.

With expectations so high, a disappointment would hit hard.

“If they miss, the entire stock market’s gonna go down,” Adam Parker, founder of Trivariate Research, said in an interview. “There’s no question about that.”

One wildcard is supply. Some on Wall Street are warning that sales might be limited by Nvidia’s ability to secure enough chips from TSMC. Still, most don’t see it being a problem for the stock if forecasts are good, because those sales would be pushed into subsequent quarters.

For the broader market, facing headwinds including higher interest rates and an economic slowdown, a positive report may help to reassure that AI has game-changing potential to boost productivity and profits in many industries. Strategists at Goldman Sachs this week introduced an “AI trade after the trade” basket — stocks with the largest potential long-term earnings boost from the impact of AI on labor productivity.

Earnings for the median stock in that basket could be 72 per cent higher than the current baseline following widespread AI adoption, strategists led by Ryan Hammond wrote in a note.

But Morgan Stanley’s Michael Wilson — a stalwart equity bear — cautioned that souring sentiment about the macroeconomic backdrop means that even blowout results may not be enough to propel markets higher this time.

“We don’t think outstanding results from Nvidia will change the complexion of the more recent price action for the other derivative plays or for the broader market in the way it did in May,” he wrote.