Nvidia's Headline Flurry: Why You're Not Bullish Enough

Play offense in bull markets.

Most investors fail to take real advantage of the types of moves we’ve seen this year for one simple reason: they’re not bullish enough.

That’s because we remain in the midst of one of the most important technological revolutions of our time. And the AI boom is (and will continue to be) backed by corporate earnings, which as we know, are one of the most important drivers of stock market returns over time.

Back in the late ‘90s, the dot-com bubble portrayed several alarming characteristics, including the fact that many of the stocks that soared during that time had zero earnings. That’s not the case here.

Nvidia powered to a fresh record high on Wednesday after the company announced a slew of product updates and partnerships at its GTC event in Washington, D.C., becoming the world’s first company to achieve a $5 trillion market value.

Nvidia’s Reach Broadens Amid Ongoing AI Revolution

There were several major announcements. First, Nvidia is providing intelligence software giant Palantir with computing power and AI models to help companies build AI agents and systems to automate processes.

Drugmaker Eli Lilly is building an AI supercomputer running on more than 1,000 of Nvidia’s Blackwell Ultra GPUs, aimed at drug discovery that will “enable breakthroughs in genomics, personalized medicine, and molecular design at industrial scale.”

Next, Nvidia and Uber revealed they’re working together to build the world’s largest network of Level 4-ready autonomous cars. The duo will build out 100,000 vehicles beginning in 2027 using Nvidia’s Drive AGX Hyperion 10 platform.

Nvidia also revealed that it is working with the US Department of Energy to build seven new supercomputers, including one that will use 10,000 Blackwell GPUs. In addition, the company is working with Nokia to help develop next-generation 6G cellular technology, as well as Cisco and T-Mobile on wireless 6G buildout.

And that’s not enough. Nvidia highlighted how its AI tech is powering robotics initiatives from companies like Amazon, Caterpillar, and Belden. And its new open systems architecture, NVQLink, will accelerate quantum computing with partners Rigetti and IonQ.

The Nasdaq Composite, S&P 500 and Dow Jones Industrial Average are trading at or near fresh all-time highs. This string of record highs may be something we see more of as the fourth quarter rolls on.

Fed Cuts Rates, US and China Declare Truce

As was widely expected, the Fed continued the easing process with another 25-basis point cut on Wednesday. But Fed Chair Jerome Powell expressed that another cut in December was “far from” a sure thing, prompting some volatility in the markets. Odds of a further cut before the Christmas holiday fell to roughly 68% from more than 90% prior to Powell’s speech.

The government shutdown continues for the time being and is now the second-longest federal work stoppage in US history. Remaining economic data this week – including tomorrow’s release of the September PCE inflation figures – will be delayed if the shutdown remains ongoing. Yet sentiment is improving that it could end very soon.

Meanwhile, market participants had been keeping a close eye on a meeting between President Trump and Chinese President Xi, which began late in the evening on Wednesday. With government officials outlining a framework over the past week, the stage was set for a more concrete deal between the world’s two largest economies.

And after month of chaos and confusion, the two countries agreed to a one-year truce in a bid to deescalate trade tensions. Chinese President Xi stated that China would halt export restrictions on rare earths materials for one year and will resume buying copious amounts of US soybeans. Trump said overall tariffs on China would be cut to 47% from 57%, while the US tariff rate on goods related to the production of fentanyl would drop from 20% to 10% with a promise that China would work “very hard to stop the flow.”

While Trump mentioned that he didn’t discuss approving sales of Nvidia’s Blackwell chips to China, he did tell reporters aboard Air Force one that China would be “talking to Nvidia and others about taking chips.”

What the Zacks Model Reveals

Things are really kicking into high gear as the depth of the AI picture is revealed.

And at the heart of the movement is leading chipmaker Nvidia NVDA. The company continues to witness positive earnings estimate revisions, which our research has shown to be the most powerful force impacting stock prices.

The Zacks Earnings ESP (Expected Surprise Prediction) indicator seeks to find companies that have recently seen positive earnings estimate revision activity. This more recent information has proven to be very useful in finding positive earnings surprises, giving investors a leg up during earnings season. In fact, when combining a Zacks Rank #3 or better and a positive Earnings ESP, stocks produced a positive surprise 70% of the time according to our 10-year backtest.

NVDA is currently a Zacks Rank #2 (Buy) stock and boasts a +2.08% Earnings ESP. Another beat may be in the cards when the company reports its Q3 results on November 19^th.

Disclosure: NVDA is a current holding in the Zacks Headline Trader portfolio.

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This article originally published on Zacks Investment Research (zacks.com).

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