rewrite this title and make it good for SEOWall Street Brunch: Nvidia Highlights Holiday-Shortened Week (undefined:NVDA)

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Strong Nvidia guidance could eclipse new tariff worries. (0:21) Fed’s favorite in inflation measure due (3:49) Tariff impact: $3,600 loss on purchasing power per household. (4:48)

The following is an abridged transcript:

It’s a holiday-shortened week for Wall Street with the markets closed Monday for Memorial Day.

And it’s also Nvidia (NASDAQ:NVDA) earnings week – when traders can forget tariffs, deficits, struggling consumer sentiment, the housing slowdown and the Fed for a moment and zero in on artificial intelligence.

AI is perhaps the biggest tech-innovation momentum trade since the dot-com boom and Nvidia is the lynchpin stock.

Wall Street expects EPS of $0.73 on $43.18 billion for the coming quarter when the company issues numbers on Wednesday, but it’s the guidance that will dictate stock direction (and almost certainly broader market direction).

What’s notably different from previous results are the analyst revisions going into the release. While revenue revisions have seen the usual bullishness (29 up vs. 4 down), downward earnings revisions surpassed upward revisions 8 to 6. The cut in EPS estimates came in the middle of April when the company said it would take a $5.5 billion charge related to H20 processors exported to China.

But the gang at T3 Live note that since then the president ‘went on a dealmaking rampage in the Middle East with a major emphasis on AI. Nvidia CEO Jensen Huang said the company would sell more than 18,000 Blackwell chips to Saudi Arabia … Plus, the US is partnering with the United Arab Emirates to build a major AI campus, and Nvidia is joining the party … And the Financial Times reported that Oracle (ORCL) will drop $40 billion on NVIDIA chips for OpenAI’s new US data center.”

“So, could Nvidia deliver monster guidance on its Wednesday earnings report? It seems possible,” they said.

Oppenheimer analyst Rick Schafer says the company is likely to top estimates for the first quarter, but its guidance will likely be “roughly in-line,” despite the loss of the H20 chip in China.

“Production of flagship GB200 rack-scale systems appears to have moved past their initial ‘growing pains,’” he said. “We believe Blackwell 200/300 NVL72 equivalent volumes still on track to meet/exceed 40K this year. We see GB300 (Ultra) on track for seamless 3Q debut. Top 5 hyperscale customers make up ~50% of sales, though (management) continues to diversify topline.”

Among the SA analyst community, on the bull side KM Capital says it’s a golden opportunity to snap up shares of Nvidia before earnings, with the stock “significantly undervalued.”

“The management is relentless in driving innovation and fortifying the company’s ecosystem of hardware and software, which cements Nvidia’s strategic positioning in the AI era,” they said.

The Techie disagrees, issuing a Strong Sell on Friday based on the technical setup, noting the “stock has simply run too hot” and the “risk-reward scenario looks unfavorable at these levels, with even a solid quarter potentially triggering a ‘sell-the-news’ market reaction.”

Also on the earnings calendar:

On Tuesday, Okta (OKTA) reports.

Joining Nvidia on Wednesday are Salesforce (CRM), HP (HPQ) and ELF Beauty (ELF).

Costco (COST), Dell (DELL), Marvell (MRVL), Li Auto (LI), Ulta Beauty (ULTA) and Best Buy (BBY) issue numbers on Thursday.

On Friday we get results for Canopy Growth (CGC).

Looking to the economy, on Tuesday, April durable goods orders will be released, along with the Conference Board’s measure of May consumer confidence.

Wells Fargo economists note that April was “the first time since July 2022 that more consumers (expected) incomes to fall rather than rise over the next six months.”

They “estimate the Consumer Confidence Index rose a touch to 87.3 in May, as the 90-day pause on the sky-high “reciprocal” tariff on China provided relief. Recent announcements proposing hiked tariffs on the European Union and Apple were made after the survey cutoff.”

On Friday, April spending and income figures are due. Those, of course arrive with the Fed’s favorite gauge of inflation – the core PCE price index. The consensus is for the core PCE to rise just 0.1%, with the annual rate dropping to 2.2% from 2.3%.

But ING says a benign core PCE deflator inflation print will likely not move markets, because ‘if tariffs are going to spike again this situation may not last as companies pass costs onto customers.”

Raymond James Chief Economist Eugenio Aleman says April is likely “the final disinflationary month for the remainder of the year.”

In the news this weekend, outages on social media platform X in recent days are an indication that “major operational improvements” need to be made, Elon Musk says.

“The failover redundancy should have worked, but did not,” he posted Saturday morning.

“I must be super focused on X/xAI and Tesla (plus Starship launch next week), as we have critical technologies rolling out,” he said.

And according to latest estimates from the Budget Lab at Yale, all U.S. tariffs implemented so far this year translate to an increase in consumer prices of 2.2% in the short-run, or the equivalent of a loss of purchasing power of $3,600 per household on average in 2024 dollars.

“Consumers face an overall average effective tariff rate of 21.9%, the highest since 1909. Even after consumption shifts, the average tariff rate will be 20.7%, the highest since 1910,” the Budget Lab said.

The Budget Lab at Yale is a nonpartisan policy research organization that analyzes federal policy proposals.

For income investors, Warner Music Group (WMG), Johnson & Johnson (JNJ) and Yum! Brands (YUM) go ex-dividend on Tuesday. Warner has a June 6 payout date, with J&J paying out on June 10 and Yum paying out on June 6.

Electronic Arts (EA) goes ex-dividend on Wednesday and pays out on June 18.

Dow (DOW), Goldman (GS) and Union Pacific (UNP) go ex-dividend on Friday. Dow pays out on June 13, Goldman pays out on June 27 and Union Pacific has a payout date of June 30.

And in the Wall Street Research Corner, global financial markets could face a dramatic shift triggered by Japan’s bond market turmoil, according to noted bear Albert Edwards, chief global strategist at Société Générale.

Edwards warned that recent developments in Japan may signal the end of the favorable investment environment established since the 2008 Financial Crisis, potentially reshaping global financial landscapes in the coming months.

Japanese long-term government bond yields are experiencing an explosive rise, with a recent 20-year JGB auction described as “the worst since 1987.”

Japan’s bond market has functioned as the “keystone” of global yield suppression, with Japanese institutions historically supporting markets through yen-funded carry trades and substantial foreign bond purchases, particularly U.S. Treasuries, Edwards said.

This era appears to be ending as capital returns to Japan while the Bank of Japan loses control of its long-end curve and FX-hedged returns on Treasuries become deeply negative.

The unwinding of these massive carry trades could create a “loud sucking sound” in U.S. financial assets if higher JGB yields continue to attract Japanese investors back home, he warns. Both U.S. Treasury and equity markets remain vulnerable after being inflated by Japanese capital flows, with America’s fiscal situation adding another layer of concern, described by Edwards as a “ticking fiscal time-bomb.”