All eyes will be on Nvidia next week as investors consider the future of the AI business. Stocks hit all-time highs this week, hitting one milestone after another as colder inflation data encouraged investors worried about a Federal Reserve that could keep interest rates higher for longer. The Dow Jones Industrial Average exceeded the 40,000 point threshold for the first time. The S&P 500 rose above 5,300, also for the first time. The S&P 500 posted a record close after a record close in 2024. But what’s different about this most recent advance is that the broader market benchmark managed to reach its latest all-time high without help from the Magnificent Seven who so completely dominated the first part of this year’s rally. This quarter, the best performing sector in the S&P 500 is utilities, up 9%, followed by communications services, up 4%. The worst performing sector is consumer discretionary, down more than 2% and which includes mega-caps Amazon and Tesla. But Nvidia’s results on Wednesday could reinvigorate a trade that still has the power to propel markets higher, supported by investors driven by the transformative potential of artificial intelligence. The $2.3 trillion company is the third-largest stock in the S&P 500 by market cap and its expected move is around 8%, meaning the stock could move up or down that percentage in its quarterly report. In other words, the results could be a market-defining event, given the size and popularity of the chipmaker. “Nvidia will be the stock that doesn’t make it as boring as this rally, because when utilities and financials are leading, they don’t make the headlines,” said Jay Woods, global equity strategist. head at Freedom Capital. Markets. “Nvidia is making headlines, so I can’t wait to see how the market reacts to this.” NVDA YTD mountain Nvidia For investors, the results could help the major averages continue to rise – or stall their momentum. The 30-stock Dow posted its fifth straight week of gains on Friday, a streak it hasn’t had since February. The S&P 500 and Nasdaq Composite each closed a fourth straight week of gains. Market Driver By now, investors are accustomed to Nvidia beating expectations in its earnings reports, no matter how exorbitant they may be. In fact, Piper Sandler’s Harsh Kumar, who has a buy rating on the stock, said he expects the chipmaker to beat revenue expectations by $1.5 billion to $2 billion in its next report. Over the past three quarters, Nvidia’s revenue has averaged more than $1.9 billion, he noted. Kumar expects this to mean markets could take it in stride if the chipmaker meets or somewhat exceeds expectations. However, when it comes to AI investors, what’s most important are the details that CEO Jensen Huang could share in terms of future demand for Nvidia products. While the company’s new generation of AI graphics processors, called Blackwell, are expected to be “incredibly better” compared to competitors, Kumar said, investors are looking for signs that demand continues to remain robust and orders remain on the right track. Strong guidance has the potential to not only advance Nvidia, but also the broader AI business, as software names take a back seat of late. “It’s a new catalyst” for this theme, said Zachary Hill of Horizon Investments. But investors may be less forgiving of the disappointment of last year’s market darling. Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, said he could see the broader markets sell off “more than 1%” — in fact, 1.5%, 2%, or “something worse” — if the message of Nvidia is scaring investors, in large part because of the place the chipmaker occupies in their imagination “really” is the iconic image of the AI revolution, for all the enthusiasm people feel. about potential productivity gains and a new era of computing through artificial intelligence,” Zaccarelli said. “So if they can continue to exceed expectations, I think that will do a lot for “To Conversely, if they give bad forecasts or disappointing results, I think a lot of the positive sentiment that we had this week could be reversed,” Zaccarelli added. the week’s earnings report is more optimistic. Regardless of how Nvidia’s stock performs after the company’s earnings, investors expect the long-term story to still be intact, and many predict that any decline in the stock price will be quickly redeemed. Nvidia is up nearly 87% this year, but has only gained 2% this quarter. “Regardless of their performance, I still think in the long run it should be in everyone’s portfolio to some extent,” said Woods of Freedom Capital Markets. “This is the main AI game.” Maintaining All-Time Highs Nvidia’s earnings will also be a key catalyst at a time when technicians are watching whether stocks can maintain the record highs they hit this week. Katie Stockton of Fairlead Strategies said she is monitoring whether the S&P 500 can hold above the 5,260 resistance level through next Friday, a confirmation of the breakout that would be a bullish development for stocks. But the technician also worries about further weakness ahead, citing mixed signals in momentum indicators. “The short-term indicators, in terms of momentum, are of course pointing upwards, but the medium-term indicators are pointing more downwards,” Stockton said. “So we are still in a situation where we believe the market is vulnerable to a further decline in the corrective phase that started in April.” “We’re watching and waiting to see how it plays out,” Stockton added. Weekly Ahead Calendar All times ET. Monday May 20 No notable events. Earnings: Palo Alto Networks Tuesday May 21 No notable events. Gains: AutoZone, Lowe’s Companies Wednesday, May 22 10 a.m. Existing Home Sales (April) 2 p.m. FOMC Minutes Gains: Nvidia, TJX Cos., Analog Devices, Target, Raymond James Thursday, May 23 8 a.m. Building Permits 8:30 a.m. Chicago Index Fed National Activity Report 8:30 a.m. Continuing Unemployment Applications 8:30 a.m. Initial Claims 9:45 a.m. Composite PMI Preliminary 9:45 a.m. S&P Manufacturing PMI Preliminary 9:45 a.m. S&P Services PMI Preliminary 10 a.m. New Home Sales 11 AM Kansas City Fed Manufacturing Index Gains: Intuit , Ralph Lauren Friday, May 24, 8:30 a.m. Sustainable Orders — CNBC’s Nick Wells contributed to this report.