Nvidia, the $3 trillion AI leader, is set to report earnings on Wednesday, February 26. Analysts expect the company to continue demonstrating robust demand for its graphics processing units and high-performance computing products, leading to positive stock movements. Despite this optimism, there are concerns about broader economic risks.
Although inflation fears have reduced somewhat, geopolitical uncertainties have increased with recent policy changes, including tariffs and immigration measures introduced by the Trump administration. These factors could contribute to economic instability, potentially leading to a recession—an important consideration for Nvidia. Trade uncertainties, particularly with longtime allies such as Canada, Mexico, and Europe, add to the complexity.
The outcomes of ongoing negotiations could significantly impact the US economy and, by extension, technology companies like Nvidia.
Nvidia’s economic challenges and opportunities
Historically, Nvidia’s stock has been highly volatile and has struggled during economic downturns.
For example:
– Inflation Shock (Jan 2022 – May 2023): Nvidia’s stock fell from a high of $33 in November 2021 to $11 in October 2022. It took 154 days to recover, whereas the S&P 500 took 317 days. – COVID Recession (Feb – April 2020): The stock dropped from $7.83 in February 2020 to $4.89 in March 2020, recovering within 56 days compared to the S&P 500’s 148 days.
– Great Recession (Dec 2007 – June 2009): Nvidia’s stock plummeted from $0.91 in October 2007 to $0.14 in November 2008. It took 2,715 days to recover to its pre-recession levels, while the S&P 500 took 1,480 days. For investors wary of this volatility, diversified portfolios like the Trefis Collection of 30 stocks have historically outperformed the S&P 500 while offering a smoother ride.
As Nvidia prepares to announce its earnings, investors will watch closely to see how these broader economic factors play out and impact the company’s performance and stock price.
