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(Sharecast News) - The main attraction on Wednesday will be the latest quarterly results from US chip maker Nvidia, which are due after the close of markets.
Kathleen Brooks, research director at XTB, said Nvidia is "the big kahuna" of the AI world, and its chips are powering the global AI revolution.
"This means that their results are central for financial markets," she said. "Nvidia is now so powerful and cash-rich that it is almost like a central bank to the tech industry. It teamed up with 5 US financial institutions, including KKR and Blackrock, to establish an independent compute financing platform to mobilize $500bn in third party capital that will be deployed to the AI build out.
"This is one reason why Nvidia's results are so important. The market was not impressed by Nvidia's pivot to the finance world, and its share price dipped by 5%.
"News that Nvidia will increase costs by up to 15% for its largest customers could send waves through the AI trade as we start a new week, however, its stock price was calm overnight. Meta, which is offering to sell its excess compute, also saw its share price stabilize overnight, after dropping 7% last week.
"Increasingly, the AI trade is being divided into winners and losers: the winners are those who supply the chips and the compute power, the losers are those who must buy it to build out their AI ambitions. Increasingly, it looks like full-stack AI providers, those who have their own chips, build compute and sell AI infused products will be the big winners from the AI race.
"Nvidia is expected to deliver another monster revenue report, with over $92.05bn of revenue expected for last quarter. These results will also offer insight into demand for AI infrastructure, how Nvidia is managing Chinese competition and what the future holds. Investors are desperate to predict when we will hit peak AI, but Jensen Huang could keep them waiting for some time if the results are as good as expected."
Also in the US, CrowdStrike, Abercrombie & Fitch and Kohl's are slated to report earnings, while in the UK, first-half results from Central Asia Metals are due.
On the data front, US core PCE inflation - the Federal Reserve's preferred measure of inflation - for July is due, along with the second estimate of US Q2 GDP.
Neil Wilson, UK investor strategist at Saxo Markets, said the data will detail how far away the central bank is from achieving its mandate and potentially reset market expectations for the path of policy rates.
Wilson said headline PCE inflation is expected to decline slightly to +3.6% year-on-year, while core PCE is seen holding steady at +3.3%. "The data if confirmed should keep the September FOMC meeting in play for a potential rate hike," he said.
"Three dissenters called for a hike in July but minutes of that meeting revealed a more hawkish lean among policymakers. While CPI inflation leant softer, leading markets to trim rate hike bets, the PCE could swing things in the other direction.
"Higher inflation trends could pressure on long-end bonds (where the concern is) but ultimately if the data nudges the Fed to hike sooner then it ought to tamp down on the rise in long-end yields by containing inflation expectations through a more credibility dividend."