Nvidia's impact on S&P 500 earnings growth: Chart of the Day

Nvidia's (NVDA) first-quarter earnings are highly anticipated as the chip company's stock closed at a record high on Tuesday.

Yahoo Finance's Julie Hyman breaks down Nvidia's earnings expectations and the important role it plays as a catalyst for the broader equity market, particularly in the S&P 500 (^GSPC).

For more expert insight and the latest market action, click here to watch this full episode of Asking for a Trend.

This post was written by Melanie Riehl

Video transcript

Yes.

Expectations for Nvidia's latest report, they are sky high and the tech giant even closed at an all time record.

But what does it all mean for the S and P 500?

Let's take a look at our chart of the day.

Bloom Bird anticipating.

The tech giant is gonna add nearly 2.5% of eps growth to the first quarter of the year.

And Yahoo Finance's Julie, he is standing by with a deeper dive ahead of Nvidia's highly anticipated earnings report.

Julie can't stop talking about it, but this chart helps explain why Josh, why is in video so important, not just for itself but for the broader market and indeed these, this is an estimates gathered by Bloomberg.

So we're looking at averages here for the first quarter.

The estimate is that in video alone added 2.4% points to earnings per share growth for the S and P 500.

If you look at the out quarters in the estimates as well, you're looking at it alone accounting for at least a percentage point of earnings per share growth for the S and P 500 even as far as in the fourth quarter when it's looking like, you know, well, a little bit smaller at that point as the growth gets a little bit smaller.

But nonetheless, as we know, there is an incredible ripple effect here because of the demand for generative A I the chips to power that Invidia makes the chips and software, by the way.

And then the sort of ecosystem that has grown up around NVIDIA as we talked about in the last hour, then you also have utility companies that are powering the data centers that suck up a lot of energy.

So there is this big ripple effect, but this chart illustrates that even NVIDIA alone accounts for a lot of the earnings growth that we are going to see in the S and P 500 this year.

So here's the question Julie, he and what is ahead?

I mean, do analysts expect the growth to continue here?

Well, with perhaps some diminishing returns, that's what's interesting.

So if you look at the earnings per share growth that the company has seen over the past several years, here's a chart here going back five years of the company's earnings per share.

And you can see there has been an explosion last year around this time when there was really this ramp up in demand for generative A I and for the GP U that makes to power the training of all of these large language models.

So that's it's been going on here, the two sort of lighter color bars, you see, there are the estimates for the next two quarters or this current quarter that's about to report and the following quarter.

Well, what's interesting is the sort of diminishing returns.

In other words, as the numbers have gotten bigger, the it's harder these year over year comparisons.

Let me show you what I mean here on the next graphic because while analysts are looking for 418% in earnings per share growth in the order that we're going to get tomorrow after the close the first quarter of fiscal 2026 looks like only 29% growth.

And then actually a drop in the year after that couple of things happening here.

By that time, perhaps we'll have seen more of these large language models actually be completed.

Yes, then they'll be working, they'll be doing the inference.

So there's some questions about how much demand there will be for GP U.

But also it's presumed that there will be more competition in this market that both the other chip companies will have developed their alternatives.

But also the so called hyper scalers, the companies that control the cloud or that run the cloud, the Amazons of the world will also have developed their own chip.

So a little bit more uncertainty, the farther out we get as is natural.

But it will be interesting to see if they do even manage to keep up a triple or double digit pace of growth going out to the next few years.