Tech Tumbles, All Eyes on Nvidia

• After what started as a rough week for tech, positive remarks from Fed Reserve Chairman Jay Powell pulled the major indices out of the red
• Q2 reports to watch this week: Nvidia, Abercrombie and Fitch, Gap, Urban Outfitters, Kohl’s, Burlington Stores, Alibaba, Ulta and more
• Q3 earnings season begins on October 14 when JPMorgan, Citigroup, Goldman Sachs and Wells Fargo report

The Fed to the Rescue 

Last week, a tech rout that began on Tuesday led to notable declines in the Nasdaq Composite (-2.5%) and S&P 500 (-1.2%) by market close on Thursday, with the Dow Jones Industrial Average roughly flat. Investors engaged in profit-taking, amidst concerns about the high valuations of many technology companies. Palantir, a defense AI company, was a notable example. Despite impressive Q2 earnings that drove the stock to a record high of $190, that price movement resulted in an over-heated P/E ratio of 193 that had investors retreating. The typically light trading volume in August, with fewer investors actively engaged, also contributed to these wider-than-usual market swings.

But by Friday, those losses had turned around when Federal Reserve Chairman, Jerome Powell, gave promising remarks regarding interest rate cuts during his annual address at Jackson Hole. “With policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance,” he said. He noted that while the US labor market remains resilient, those risks are creeping up, as are the risks of tariff inflation.¹ As a result of these comments, the CME Group’s FedWatch tool saw the probability of a September rate cut jump to 87.3% from 75% the day prior.² The S&P 500 and DJIA ended the week higher, with the latter reaching an all-time high. The Nasdaq Composite still ended the week 0.56% lower.

The Tech Trade’s Next Test – Nvidia Q2 Earnings on Deck

The next big catalyst for the tech trade comes next week when AI darling Nvidia is out with Q2 results. Analysts surveyed by FactSet anticipate significant year-over-year growth, with EPS projected to rise by 47% and revenue by 53%, driven by strong demand for their advanced Blackwell Ultra chip. 

However, investor focus will also be on Nvidia’s revenue from China. A recent note from a KeyBanc analyst suggests that Nvidia may “exclude direct revenue from China given pending license approvals and uncertainty on timing”, mirroring AMD’s decision earlier in the month.³ The clarity of the Chinese market is increasingly obscured by evolving export controls, the potential for the US government to claim 15% of revenues from chips sold to China, and the Chinese government’s push for domestic AI chip utilization among its AI providers.

Retail Wrap-Up 

The earnings season concludes with the final trickle of retailers, and so far, results have been mixed. TJX Companies, parent to off-price retailers TJ Maxx, Marshall’s and Home Goods, reported better-than-expected Q2 results last week.⁴ They benefited from less tariff exposure (off-price retailers typically buy excess inventory from brands after tariffs are paid) and from value-seeking U.S. consumers. Ross Stores reported similar results Thursday after-the-bell, beating EPS expectations and providing better-than-expected guidance for Q3.⁵ Fellow off-price retailer, Burlington Coat Factory, reports on Thursday, August 28.  

Specialty and apparel retailers are in a less favorable position than off-price retailers. Last week, Citi analyst Paul Lejeuz, downgraded Abercrombie and Fitch, Gap, and Urban Outfitters.⁶ Upcoming reports will reveal how the back-to-school shopping season performed and what plans are for the holiday season. Apparel companies have had to offer promotions to move inventory, while also facing increased costs from tariffs, creating a difficult situation for the sub-sector.  

Source: Wall Street Horizon

Q2 Earnings Wave

Next week will see 1,383 companies from our universe report. Thus far, 79% have reported (out of our universe of 11,000+ global names). The next earnings season begins on October 14 when JPMorgan, Citigroup and Wells Fargo report Q3 earnings.

Source: Wall Street Horizon

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Originally Posted August 25, 2025 – Tech Tumbles, All Eyes on Nvidia

1 “Powell indicates conditions ‘may warrant’ interest rate cuts as Fed proceeds ‘carefully’”, CNBC, Jeff Cox, August 22, 2025, https://www.cnbc.com
2 CME Group FedWatch Tool, August 22, 2025, https://www.cmegroup.com
3 “Nvidia could guide below consensus on China worries, KeyBanc warns”, Yahoo Finance, Sam Boughedda, August 20, 2025, https://finance.yahoo.com
4 The TJX Companies, Inc. Reports Q2 FY26 Results, August 20, 2025, https://investor.tjx.com
5 Ross Stores Reports Second Quarter Earnings, August 22, 2025, https://investors.rossstores.com
6 Citi downgrades Abercrombie & Fitch and Urban Outfitters on tariff risks into Q2 results, Seeking Alpha, Amy Thielen, August 20, 2025, https://seekingalpha.com