Nvidia jumps 4.5% to $221.45 as AI stocks lead market rally

Nvidia shares rose 4.5% to $221.45 on Aug. 5, the highest close since June 4, lifting the company's market capitalization to $5.36 trillion and extending a five-session winning streak. The advance came as semiconductor stocks climbed nearly 7% and the S&P 500 technology sector gained 4.5%, with the Dow Jones Industrial Average closing above 54,000 for the first time at 54,215.07, up 1.95%.

"I don't sense one ounce of skepticism among investors," said Jack Ablin, chief investment strategist at Cresset Capital, as the S&P 500 rose 1.89% to 7,743.77 and the Nasdaq Composite gained 2.61% to 26,590.99. Advancing issues outnumbered decliners by a ratio of 2.11-to-1 on the New York Stock Exchange, with 85.2% of the 304 S&P 500 companies that have reported so far surpassing earnings expectations, well above the historical average of 67.5%.

Earnings expectations build

Nvidia reports fiscal second-quarter results on Aug. 26, with analysts projecting revenue to jump 96% year over year to $91.85 billion and earnings per share to nearly double to $2.08 from $1.05 a year earlier. The company has beaten Wall Street's profit target by 3% to 6% in each of the past four quarters, though shares moved lower after each report before eventually recovering.

The stock enters the earnings window at a valuation that has become more attractive after months of consolidation. Nvidia trades at roughly 22 times this fiscal year's projected earnings of $9 per share and below 16 times next year's consensus of $12.89, according to analyst estimates compiled by the Motley Fool. Three months ago, Wall Street was modeling $8.34 per share for fiscal 2027 and $11.23 for fiscal 2028.

Macro backdrop turns favorable

The broader market environment has shifted in Nvidia's favor. U.S. crude fell 5.43% to $75.98 a barrel, easing inflation concerns and pulling the 10-year Treasury yield down 4.91 basis points to 4.635%. June job openings declined to 7.359 million, pointing to gradually softening labor demand without a sudden deterioration in employment.

Nvidia's rally has been supported by accelerating revenue growth — from a 56% year-over-year increase in last year's fiscal second quarter to 63%, 73%, and 85% in subsequent reports. Trade restrictions in China and supply-chain constraints continue to limit full-strength production, but competitors face the same headwinds.

The stock's 52-week range spans $164.07 to $236.54, leaving room for further upside if the Aug. 26 earnings report delivers the kind of beat investors have come to expect. With the AI infrastructure buildout expanding beyond hyperscalers to enterprise and sovereign customers, Nvidia's order visibility remains strong. The company's gross margin stands at 74.15%, and its dividend yield is 0.14%.

This article is for informational purposes only and does not constitute investment advice.