Nvidia (NVDA +2.71%) stock is losing ground in Tuesday's trading. The artificial intelligence (AI) leader's share price was down 5.9% as of 1 p.m. ET, according to data from S&P Global Market Intelligence.
NASDAQ: NVDA
Key Data Points
While there isn't any business-specific news pushing Nvidia lower today, the stock is losing ground due to macroeconomic concerns and underwhelming business results from some major players in the retail space. In particular, the graphics processing unit (GPU) specialist's share price is being pushed lower due to results and commentary from Walmart and Home Depot.
Why are retail results impacting the AI leader's stock?
While there might not seem to be much immediate overlap between Nvidia and retail, Walmart and Home Depot are often viewed as bellwethers for the broader economy. Their quarterly results can provide a lot of valuable information about consumer sentiment and overall macroeconomic conditions, and Wall Street didn't like what it saw when the two companies reported earnings before market open this morning.
While Walmart beat earnings expectations and issued encouraging forward guidance, the company's guidance could be taken as a sign that the economy is still running hot and that inflation isn't tapering enough. Home Depot was more explicit with its comments on inflation, stating that it was seeing unfavorable demand trends due to persistent inflation.
In addition to raising another red flag that the Federal Reserve's battle with inflation hasn't been won yet, Home Depot's comments could also be interpreted as a negative indicator for the housing market. Stocks don't trade in a vacuum, and Nvidia's valuation is feeling that today.
What comes next for Nvidia?
Even with today's pullback, Nvidia stock has risen roughly 218% over the last year. The company's explosive gains have largely been powered by surging AI-driven demand for its high-end GPUs, but expectations that the Fed will begin cutting interest rates in the near future have also played a major part in the rally.
If it looks like the central banking authority will push rate cuts further out, it could dampen bullish momentum for Nvidia. But in the ultra-near term, investors have a crucial event to narrow in on.
Nvidia is scheduled to report its fourth-quarter earnings results after the market closes tomorrow, and it's poised to be one of the most important stock market events of 2024. With its last update, the company guided for sales of roughly $20 billion -- suggesting growth of nearly 231%. While recent demand trends suggest there's a good chance the GPU leader will beat that guidance, the explosive run-up for its stock means that performance will be under the microscope -- and investors will be expecting perfection.
