Good Morning Investors,
All eyes are on Nvidia today, the most anticipated earnings release of the quarter and the final reveal from the Magnificent Seven. This print will decide whether the AI-led bull market keeps expanding or hits a wall. Nvidia now carries the biggest single weight in the S&P 500, making tonight’s results not just a tech story but a market-wide sentiment pivot. With earnings estimates up over 1,100% since ChatGPT’s launch and forward P/E nearly halved from 2022 peaks, the question is whether guidance can keep pace with the hype.
Opening Bell
U.S. stock futures are trading just above the flatline as investors wait on Nvidia’s results. The calm belies a packed backdrop: AI earnings, a legal battle over Fed independence, and a weakening dollar shaping cross-asset flows. In Europe, equities are recovering from Tuesday’s drop. In Asia, Japan’s Nikkei rose 0.8% on semiconductor-linked buying led by Nvidia supplier Advantest, while Shanghai pulled back after an AI-driven morning rally. The dollar firmed slightly, gold eased on profit-taking, and oil extended losses ahead of U.S. data later this week.
Macro Landscape: Nvidia’s Defining Test
Nvidia’s ($NVDA ( ▼ 0.09% )) forward P/E has compressed from around 70x in 2022 to roughly 33x today, even as the stock has risen 964% since ChatGPT’s launch. Forward earnings estimates have climbed about 1,100%, meaning earnings growth has far outpaced price gains. That challenges the bubble narrative and underscores the shift from a gaming-heavy business to AI and data centers.
For Q2, Wall Street expects EPS of $1.01 on $46.2B in revenue, with data center sales topping $41B. China tariffs have shaved roughly $8B from quarterly potential (about 17% of expected revenue), but the impact is largely priced in. Guidance is the swing factor, especially if China revenue is excluded from forward projections.
Beyond the cloud, Nvidia is pushing AI into robotics. Its new Jetson AGX Thor delivers 7.5x the AI compute of its predecessor, 128GB of memory, and up to 2,070 FP4 teraflops at 130 watts, enabling multiple generative AI models to run in real time at the edge. Early adopters include Amazon Robotics, Caterpillar, Meta, Boston Dynamics, and Agility Robotics. While robotics is ~1% of current revenue, it positions Nvidia for the next major “AI in motion” growth wave.
Corporate Buybacks at Record Pace
On August 20, U.S. companies hit $1 trillion in completed share buybacks for 2025, the fastest pace on record. Birinyi Associates projects that announced buybacks will reach $1.3 trillion by year-end, translating into about $1.2 trillion executed in 2026. Apple, Alphabet, and JPMorgan lead with $100B, $70B, and $50B programs respectively. Citadel Securities estimates current buyback flows at $4.4B per day, but warns this support will fade as the blackout period begins mid-September. Retail flows have also been a consistent net positive, though September seasonality and post–Labor Day volume shifts point to higher volatility ahead.
Fed Independence Under Assault
President Trump’s unprecedented attempt to fire Fed Governor Lisa Cook has triggered a constitutional fight now headed for the courts. Cook has vowed to stay, and a Trump win would give him majority control of the Fed Board, reshaping both policy direction and regional bank leadership. Markets have taken the news in stride, focusing on near-term alignment over rate cuts, but the long-term risk is a credibility hit that could lift long-term rates and weaken the Fed’s inflation-fighting ability.
The stakes go beyond Cook. With vacancies and February term expirations ahead, Trump appointees could gain influence over regional Fed presidents, potentially remaking the institution “in his image.”
Google Cloud’s Financial Blockchain Play
Google ($GOOGL ( ▲ 0.16% )) Cloud is building its own blockchain network for the financial sector, the Google Cloud Universal Ledger (GCUL). Announced by Web3 Head of Strategy Rich Widmann, GCUL aims to provide a performant, “credibly neutral” platform for institutions to build Python-based smart contracts. The permissioned, compliance-focused network is currently in private testnet, with CME Group already piloting use cases in wholesale payments and asset tokenization. While Widmann calls it a Layer 1, its private nature has drawn community skepticism. The initiative underscores Google Cloud’s ambition to own the infrastructure layer for digital assets and payment automation.
Corporate Highlights
Apple set September 9 for its iPhone 17 launch event, expected to feature a slimmer model trading battery life and cameras for weight reduction, plus new Apple Watches.
Okta beat estimates and raised guidance, with public sector deals making up half of its top ten wins in Q2, reflecting AI-driven security demand.
MongoDB surged on strong Atlas growth and raised FY26 guidance on accelerating enterprise adoption.
Korean Air placed a record $63.7B order ($50B aircraft, $13.7B engines) during the South Korean president’s U.S. visit.
Gilead Sciences won EU approval for its twice-yearly HIV prevention injection, projected to exceed $4B in annual sales by 2029.
Analysts’ Notes
MongoDB: D.A. Davidson raised target to $325 from $275 on stronger Atlas growth and improved profitability outlook.
Regeneron: Jefferies raised target to $831 from $813 on strong product performance and IP wins.
Domo: TD Cowen upgraded to buy and lifted target to $21 from $13 on progress in shifting to consumption-based pricing.
Today’s Calendar (ET)
08:30 – Durable Goods Orders (July)
09:00 – FHFA House Price Index (June)
10:00 – Consumer Confidence (Aug)
10:00 – Richmond Fed Manufacturing Index (Aug)
After the bell – Nvidia, CrowdStrike, HP, Williams-Sonoma, Snowflake, Abercrombie & Fitch, Pure Storage, Urban Outfitters, The J.M. Smucker Company
Final Thought
Today’s Nvidia report is more than a single earnings print, it is the litmus test for whether AI earnings power can keep pace with investor expectations. The fact that forward valuations have nearly halved while the stock has surged tenfold is proof that the story is earnings-led, not speculative froth. With 44% of S&P 500 companies raising revenue guidance versus just 14% cutting (the best ratio since 2021), corporate confidence is running ahead of Wall Street’s cautious narrative.
The bigger picture is a market broadening that looks increasingly durable. Equal-weight S&P 500 is nearing all-time highs, small and mid-caps are outperforming, and rate-sensitive sectors like homebuilders are riding rate cut expectations. A weakening dollar adds another layer, setting up international equities to join the rally. This isn’t about abandoning mega-cap tech, it’s about reducing concentration risk, capturing cyclical upside, and letting multiple pillars support the advance. I expect to add back larger exposure to tech on any pullback. With the seasonality of September, I expect to get an opportunity.
I expect equal-weight to break to new highs, small and mid-caps to extend their leadership, and international markets to also continue to rally on a weakening dollar. That’s the structure of a bull market that can run deep into 2026, with both structural tech growth and cyclical breadth driving the tape higher.
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Dan Sheehan
This newsletter is for informational purposes only and should not be considered as investment advice. Please consult with your financial advisor about your specific situation.