How Nvidia’s earnings-driven stock price move could impact the broader market

Ahead of the release of Nvidia’s (NVDA) long-awaited earnings report after the bell on Wednesday, investors may be bracing for significant stock price moves following the announcement, which could impact major indexes and ETFs.

Given rising expectations for Nvidia’s financial results, Susquehanna analysts warned that Nvidia may need “at least $1.5 billion” for the stock price reaction to be subdued, suggesting a large reaction may be likely and trading activity options suggests that investors can expect stock prices to increase by 10% in either direction.

Firstrade CEO Don Montanaro told Investopedia that options trading clients at the online brokerage for retail investors expected a short-term pullback after the earnings announcement.

Nvidia’s recent earnings reports have seen wild share price fluctuations

Significant changes in Nvidia’s stock price before and after the earnings report have been the norm in recent quarters.

Nvidia shares fell from the company’s previous earnings report in February and gained more than 9% in extended trading after results beat estimates. The announcement of the results caused Nvidia’s market capitalization to exceed $2 trillion in the following days.

A year ago, Nvidia shares rose more than 20% in extended trading after the company reported strong results.

Nvidia’s stock move could impact S&P 500, Nasdaq 100 and more

Nvidia’s growing influence on major indexes and exchange-traded funds could mean that a big move in its stock price will have an impact on the broader market.

The chipmaker, which has a market capitalization of about $2.3 trillion, has a significant position in the S&P 500 and Nasdaq 100 indices. Nvidia makes up about 5.5% of the S&P 500, making it the third-largest company in the index at the beginning of May only Microsoft (MSFT) with about 7% and Apple (AAPL) with less than 6%.

Nvidia’s share in the Nasdaq 100 index is approximately 6.5%, behind Microsoft’s 8.6% and Apple’s 8%, which is reflected in the holdings of the Invesco QQQ ETF (QQQ), the ETF that mirrors the index.

So far this year, Nvidia shares have performed significantly better than the S&P 500 and Nasdaq 100 indexes, with Nvidia shares nearly doubling in value while the S&P 500 and Nasdaq indexes have gained about 11% over the same period.

Semiconductor industry ETFs highly exposed to Nvidia

A significant price movement in Nvidia stock could also impact many semiconductor ETFs such as VanEck Semiconductor ETF (SMH) and iShares Semiconductor ETF (SOXX).

Nvidia makes up more than 20% of the VanEck Semiconductor ETF, making it the heaviest stock in the ETF, followed by Taiwan Semiconductor Manufacturing Company (TSM) with almost 13%. Nvidia has a 9% stake in the iShares Semiconductor ETF, followed by Broadcom (AVGO) with 8% and Qualcomm (QCOM) with less than 7.5%.

As Nvidia shares have almost doubled since the start of 2024, the VanEck Semiconductor ETF has gained more than 34% and the iShares Semiconductor ETF has gained more than 22%.

Nvidia shares fell about 1.5% to $940.50 around 1:50 p.m. ET on Wednesday, ahead of the chipmaker’s earnings report, which was due after the bell.