Financial Watch: More Retailers, CrowdStrike, Nvidia – and ‘The Most Important Tech Financial Results in Years?’

By Bill Peters

Nvidia reports AI bubble concerns. Nordstrom and Gap report as bargain hunting separates big chains from small ones.

Some Wall Street analysts say Target Corp.’s stronger quarterly results last week were a sign that shoppers are turning to retailers for discretionary spending — that is, things like clothing and home decor. If that’s the case, where does that leave the Nordstroms, Gaps and Abercrombies of the world?

We’ll find out this week when those chains and other smaller retailers start reporting results.

Elsewhere during the week, CrowdStrike Holdings Inc. is reporting on last month’s software infrastructure collapse. And a small $3 trillion company known as Nvidia Corp. also has an earnings deadline, as questions intensify about the health of the artificial intelligence boom that has buoyed tech stocks and the broader market for nearly two years.

In a note Thursday, Wedbush analysts led by Daniel Ives called Nvidia’s results “the most important tech earnings in years.” And after this month’s market indigestion and the Federal Reserve’s increasingly likely interest-rate cut plans, they also said the coming week could be “the most important week for stocks this year.”

The retailer results, at least, come as big chains like Walmart Inc. (WMT) and Target (TGT) show signs they’re putting the current retail industry woes behind them. Meanwhile, executives at some of their smaller peers, like Macy’s Inc. (M) and Urban Outfitters Inc. (URBN), are warning of continued consumer anxiety as higher prices for groceries and other essentials take a toll on personal bank accounts.

On Tuesday, Nordstrom Inc. (JWN) and PVH Corp. (PVH) — maker of Calvin Klein and Tommy Hilfiger — will report results. On Wednesday, Bath & Body Works Inc. (BBWI), Foot Locker Inc. (FL), Kohl’s Corp. (KSS), Chewy Inc. (CHWY), Abercrombie & Fitch Co. (ANF), Five Below Inc. (FIVE) and Victoria’s Secret & Co. (VSCO) are expected to report results.

Duluth Holdings Inc.’s results will be released on Thursday. (DLTH), Burlington Stores Inc. (BURL), Dollar General Corp. (DG), Best Buy Co., American Eagle Outfitters Inc. (AEO), Ulta Beauty Inc., Ollie’s Bargain Outlet Holdings Inc. (OLLI) and Gap Inc. (GAP).

Demand for things like clothes, sneakers and bedding has been strained for the past two years, although UBS analysts last week predicted a “decent” back-to-school shopping season. While some retailers have called beauty products a bright spot — and Warren Buffett’s Berkshire Hathaway Inc. (BRK.A) (BRK.B) recently unveiled a new stake in Ulta Beauty (ULTA) — the industry has faced more competition and a greater risk of a slowdown.

Elsewhere, shoppers are becoming pickier about pet food and other pet supplies. Best Buy (BBY) said demand for laptops is healthy, but the company is waiting for a stronger rebound in electronics. Some analysts say the company could see that as people upgrade and replace their devices and the housing market improves.

And while people continue to look for deals, retailers that offer discounts occasionally find that the problem is especially pronounced among lower-income shoppers.

This week in earnings

Salesforce (CRM), HP Inc., (HPQ), Box Inc. (BOX), Autodesk Inc. (ADSK), Marvell Technology Inc. (MRVL) and Dell Technologies Inc. (DELL) also have results coming in. As do Malibu Boats Inc. (MBUU) and Campbell Soup Co. (CPB).

Call for entries in the calendar

CrowdStrike: A month ago, the blue screen of death took over millions of computer screens around the world, disrupting air travel, hospitals and routine aspects of daily life. What caused it? A flawed software update from cybersecurity firm CrowdStrike (CRWD) for Microsoft Windows devices. More details about the fallout could emerge when CrowdStrike reports quarterly results on Wednesday.

CrowdStrike stock has fallen sharply since the crash, and has recovered to a lesser extent. That has set up a tussle between Delta Air Lines Inc. (DAL), which was hit hardest by the outage, and Microsoft. Lawmakers are demanding answers. Some on Wall Street have said to buy the dip. But others have said the incident is unlikely to be the last as cyberattacks become large enough to reach Main Street and tech companies grow larger and more artificially intelligent, leaving more vulnerabilities in their wake.

Numbers worth paying attention to

Nvidia results: Markets have grown more nervous about when the tech world’s leap into AI will pay off, as major companies pour money into new learning models and assistants, and questions about their overall quality grow. When Nvidia (NVDA) — the chipmaker at the center of the AI boom — reports on Wednesday, those concerns will be put to the test again.

Expectations are, as usual, high ahead of the results. As usual, Wall Street analysts think the company can beat them.

“In short, we expect another ‘drop the mic’ performance from Nvidia, because right now Jensen & Co. is the only company in town with $1 trillion in AI capex over the next few years, and Nvidia GPUs are the world’s new oil and gold,” Ives said in a note Thursday, referring to Nvidia CEO Jensen Huang.

“While the fear of a rally on Tokyo’s Black Monday a few weeks ago was merely a historical signal, bulls need to see enterprise demand for AI take the lead for this market to move forward, with technology leading the way, and it all starts with Nvidia,” he continued.

-Bill Peters

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08-25-24 1811ET