Earnings Watch: Nvidia reports, as do retailers like Gap and Ulta Beauty
People attend a Nvidia production preview exhibition in Taipei on May 21. Nvidia will report earnings Wednesday.
Wall Street, collectively, may be wondering about the future growth prospects of the so-called Magnificent Seven stocks, as they invest in artificial intelligence but burn cash in the process and question whether business and customers are willing to pay for the technology.
But as artificial-intelligence chipmaker Nvidia Corp. (NVDA) prepares to report quarterly results on Wednesday - amid questions about its ability to meet demand and drama between the U.S. and China - analysts keep getting more bullish.
As MarketWatch reported last week, an analyst at Cantor Fitzgerald said AI demand was "seemingly insatiable," as its Big Tech customers heap potentially hundreds of billions into building out the technology and its infrastructure. But as the focus shifts to so-called AI inference - or making new observations or predictions when presented with data - Wall Street may have questions, as they have in the past, about whether Nvidia can supply enough chips to meet that demand.
Wall Street's focus will also likely center on China, where things have gotten a bit messy, as the two nations try to elbow each other out of the AI race and as each claim the other represents a security threat.
Nvidia said last month that the U.S. would allow the company to sell its less-sophisticated H20 AI chips - made specifically for China to comply with export controls - to the nation, after the U.S. effectively banned them in the spring. But the U.S., as part of a recent deal, will also get 15% of Nvidia's AI chip sales from China to get the license to sell there.
Meanwhile, China has discouraged businesses there from using Nvidia's chips, with state media claiming they were a security risk, according to reports. The Information reported that Nvidia, in turn, ordered a stop to the production of H20 chips.
Elsewhere, after Walmart Inc. (WMT) put up a rare profit miss amid lofty expectations and Target's (TGT) investors fled over its new CEO pick, smaller retailers report quarterly results this week. Expectations are low. The prevalence of the usual suspects for why - tariff anxieties, higher costs of living, the flight to value, weaker clothing and home-goods demand, competition in prestige beauty - is still high.
This week, we'll get reports from Ulta Beauty Inc. (ULTA), Gap Inc.(GAP), Kohls Corp. (KSS), Abercrombie & Fitch Co. (ANF), Williams-Sonoma Inc. (WSM), Victoria's Secret & Co. (VSCO) and Urban Outfitters (URBN). Bath & Body Works Inc. (BBWI), Best Buy Co Inc. (BBY), Dick's Sporting Goods Inc. (DKS) and Petco Health and Wellness Co. Inc. (WOOF), also report.
Elsewhere, results are due from discounters Burlington Stores Inc. (BURL), Dollar General Corp. (DG), Ollie's Bargain Outlet Holdings Inc. (OLLI), as the bargain hunt remains alive and well but low-income shoppers struggle more with inflation.
Still, Deborah Weinswig, chief executive of Coresight Research, said that the second-quarter results from retailers so far - Home Depot Inc. (HD) and Lowe's Cos. (LOW) also reported last week - showed that consumers were in better shape than expected. Results for the smaller retailers this week, she said, would be all about consumer traffic.
Those retailers might not have the size and bargaining power of Walmart, and some have struggled to keep up with ever-accelerating fashion cycles. But she said that they still have the sourcing expertise and organizational makeup to pivot quickly when needed.
However, value and convenience, as they have for the past few years, continue to reign supreme. Chances that Walmart took on technology investments in the prior decade continue to help it widen its lead over its other retail rivals, raising questions about what place Target and smaller retailers have in the current shopping landscape.
"Is part of the issue that they're always taking the safest path? Could be," Weinswig said of Target. "That's how they kind of ended up where they are versus Walmart."
-Bill Peters
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