Investing.com -- Nvidia's upcoming earnings report has the potential to steer the market's short-term trajectory, according to analysts at Bank of America in a note Monday.
The chipmaker, scheduled to announce its calendar third-quarter results on Wednesday, remains a dominant force in equity performance.
BofA highlighted Nvidia (NASDAQ:NVDA)'s outsized role in the S&P 500's performance, noting it has been "driving 20% of the S&P 500 return over the past year" and is projected to contribute nearly 25% of the index's earnings-per-share (EPS) growth for the third quarter.
"With the market taking a breather last week following the election rally, we believe NVDA earnings can dictate the near-term direction of the market," the analysts stated.
While broader market factors such as election results, interest rate volatility, and Federal Reserve actions dominate the current investment narrative, options data underscores the pivotal role Nvidia's earnings could play.
According to BofA, "The implied move for the SPX on that day has been fluctuating with NVDA's own earnings implied move."
They explain that the options market assigns more risk to Nvidia's earnings day than to other significant economic events, including the next jobs report, inflation data, or even the December Federal Open Market Committee (FOMC) meeting.
Given Nvidia's influence, BofA cautioned about potential fragility risks if earnings disappoint. For investors seeking to hedge broader market risks linked to Nvidia, BofA suggested strategies such as Nasdaq-100 put spreads, which "offer a 5x max payout if the Nasdaq-100 falls ~3.3% this week."
As Nvidia prepares to release its results, its performance may provide critical insight not only into the semiconductor industry but also into broader market sentiment, making it a key focus for traders and analysts alike.