Following the recent signals from the US Federal Reserve about impending interest rate cuts, the markets are now turning their attention to Nvidia. On Wednesday after the stock market closes, the chip company will present its quarterly figures – an event that could determine the sustainability of the recent rally in the S&P 500.

Analysts expect sales of more than $46 billion in the second quarter, an increase of 54 percent year over year. Earnings per share are expected to rise by 48 percent to $1.01. Nvidia is the largest individual stock in the index with a weight of almost eight percent and directly benefits from the massive investments of tech giants Meta, Microsoft, Alphabet, and Amazon, which together account for around 40 percent of the company's revenues.

The significance of the result lies not only in the numbers themselves but in the question of whether the billion-dollar investments in artificial intelligence will continue to grow or whether the euphoria will fade. "Nvidia is the heart of this market. Any hint of weakness could abruptly stop the rally," warns Eric Beiley of Steward Partners. Options already price in a price movement of six percent in both directions.

The timing is explosive: The S&P 500 climbed on Friday to its highest level since May after five days of losses, just two points below the record. But with price-to-earnings ratios of 22 for the overall market and 34 for Nvidia, valuations remain high. "We are moving in lofty heights," said Beiley, "yet investors are ignoring this in the expectation that AI favorites will continue to deliver.

One factor of uncertainty remains China. Although the U.S. government recently reauthorized the sale of Nvidia and AMD chips there under certain conditions, Beijing simultaneously encouraged domestic companies to avoid the H20 series developed specifically for China. Nvidia then halted production. Strategists like Michael O'Rourke of Jonestrading see this as a geopolitical risk: "China perceives the U.S. conditions as a provocation.

Nevertheless, the analyst community remains predominantly optimistic. Nine houses raised their price targets last week alone, with the average at around $194, roughly nine percent above the current price. Whether Nvidia can meet these expectations will be decided in a few days.