Key Market Events: Nvidia Earnings, Fed Symposium, and Trade Tensions

This week is dominated by two major events: Nvidia's earnings report, which will offer a critical insight into the ongoing AI boom, and the Federal Reserve's significant symposium in Jackson Hole, where discussions on the future direction of interest rates are expected. Beyond these, investors will also closely monitor earnings from software companies CrowdStrike and Salesforce, which present contrasting outlooks in the eyes of many.

Adding to the week's complexity is the recent collapse of U.S.-Canada trade talks. The imposition of tariffs by the Trump administration on certain Canadian goods, met with retaliatory duties from Canada, introduces an additional layer of geopolitical tension, albeit not a full-scale trade war, to the existing concerns in the Middle East.

1. Earnings and AI's Impact

By Friday, a clearer picture should emerge regarding AI's influence on hardware, software, and cybersecurity sectors. Early in the year, software stocks lagged as hardware gained momentum due to advancements in AI labs. While Salesforce was initially seen as a legacy software player, cybersecurity, conversely, was anticipated to benefit significantly from AI, rather than be disrupted by it.

The market's perception has evolved, with a better differentiation among software companies. Cybersecurity firms like Palo Alto Networks and CrowdStrike are now recognized as clear beneficiaries. This week's earnings reports from Nvidia, Salesforce, and CrowdStrike are particularly exciting as they highlight the interplay between these sectors.

Additionally, chipmaker Marvell Technology and software company Workday will release their earnings. Sentiment around the software sector has been boosted by reports that Workday could go private.

Nvidia's Outlook:

Investors will expect Nvidia to deliver better-than-expected results and strong guidance to sustain its stock's upward trend. Commentary on demand, supply chain capabilities, and maintaining high gross profit margins will be crucial. The impact of rising memory prices and Nvidia's strategies to address this, including reported price increases on AI chip servers, will be a key discussion point. Other areas of interest include the adoption of co-packaged optics in data centers and the market reception to their new standalone CPU rack, especially as agentic AI increases the demand for CPUs relative to GPUs. Questions regarding the company's $500 billion financing partnership for AI infrastructure buildout are also anticipated. Nvidia's stance on proprietary versus open-source large language models will further shape the AI trade narrative for the remainder of the year. Analysts anticipate Nvidia to report earnings per share of $2.09 on revenue of $92.04 billion.

Salesforce's Challenge:

This quarter is pivotal for Salesforce, aiming to counter the "SaaSpocalypse" narrative with its stock already up significantly from recent lows. Revenue and remaining performance obligation (RPO) growth rates will be under scrutiny, as demand in the AI era has been a major concern for the SaaS sector. Salesforce's guidance for the current quarter is expected to demonstrate its promised acceleration in revenue for the latter half of the fiscal year. The updated annual recurring revenue (ARR) for its Agentforce suite, previously $1.2 billion, will also be closely watched. Salesforce is projected to report revenue of $11.32 billion and adjusted EPS of $3.27. The company's annual Dreamforce event is scheduled for September.

CrowdStrike's Position:

The role of cybersecurity as an enabler for AI adoption, particularly for sensitive data access by autonomous technologies, is expected to be a key theme. While demand for CrowdStrike's services is likely strong, the stock price may have already factored in some of this positive outlook. Better-than-expected results and robust guidance will be necessary for the stock to resume its rally, despite a recent pullback. CrowdStrike is expected to report adjusted earnings of 29 cents per share on sales of $1.44 billion. Their annual Fal.Con expo in September could also serve as a catalyst for the stock.

2. Economic Signals and Fed Policy

Economic data releases throughout the week, including inflation figures, will lead up to Fed Chairman Kevin Warsh's speech at the Jackson Hole Economic Policy Symposium on Friday. This event, a gathering of central bankers and economists, takes on added significance as it marks Warsh's first major address since assuming the chairmanship.

Historically, a Fed Chair's initial Jackson Hole speech provides insights into their economic philosophy and leadership style. The market is keen to hear more from Warsh, who has pledged "regime change" at the Fed but has offered few specifics. Task forces have been established to examine areas such as balance sheet policy, central bank communications, and inflation frameworks, with their work expected to be completed by year-end.

Some observers note that the market is struggling to understand the Warsh-led Fed's "reaction function" – how policy will adapt to economic data. Warsh faced criticism for a lack of clarity on the conditions for an interest rate hike, given inflation exceeding the Fed's target. With oil prices rising and Treasury yields increasing, anticipation for Warsh's speech is high. His task forces may serve as a basis for his address, according to his previous statements.

Leading up to Friday, the personal consumption expenditures (PCE) price index for July will be released on Wednesday, serving as the Fed's preferred inflation gauge. Economists forecast a 0.18% month-over-month increase and a 3.2% year-over-year rise in the core PCE index. Also on Wednesday, the second preliminary reading on U.S. gross domestic product (GDP) for the second quarter and durable goods orders for July will be released. Durable goods orders, which include aircraft, offer insights into demand for long-lasting products and can impact companies like Boeing. A 0.4% increase is expected for July's durable goods orders.

This Week's Economic Calendar:

Monday, Aug. 24: Xpeng, PDD Holdings earnings before the bell; PicS earnings after the bell.
Tuesday, Aug. 25: Building permits and new home sales at 10 a.m. ET. DICK'S Sporting Goods, Bank of Nova Scotia, Vipshop, Bank of Montreal earnings before the bell; Intuit, Zoom, HEICO earnings after the bell.
Wednesday, Aug. 26: PCE price index, durable goods orders, and second-quarter U.S. GDP at 8:30 a.m. ET. Kohl's, Abercrombie & Fitch, Dycom, Williams-Sonoma, Li Auto, JM Smucker, Bath & Body Works earnings before the bell; Nvidia, CrowdStrike, Salesforce, Okta, Synopsys, Agilent, HP inc earnings after the bell.
Thursday, Aug. 27: Best Buy, Bilibili, Canadian Imperial Bank, Royal Bank of Canada, Toronto-Dominion, Dollar General, Burlington, Dollar Tree, Hormel Foods, Canadian Solar earnings before the bell; Marvell Technology, Iren, Autodesk, Affirm, Ulta Beauty, SentinelOne, Workday, Gap earnings after the bell.
Friday, Aug. 28: Fed Chairman Kevin Warsh's Jackson Hole speech at 10 a.m. ET.