We have come to the end of the busiest week of earnings season, and for the most part it was a decent week of earnings. With Apple, Microsoft, Amazon and Meta all reporting earnings this week, the only Magnificent 7 stock that has not reported their 1st quarter earnings is Nvidia, which will occur on May 28th. One analyst even suggested that NVIDIA’s earnings report will be the most impactful of the season.
NVIDIA
Even with a decline of around 18% year-to-date, Nvidia still has a market valuation of $2.72 trillion (as of 7:00AM on 5/2/2025). It is easy to see why Nvidia’s earnings would be important to the performance of the market. The S&P 500 is a market cap-weighted index, so the financial performance of Nvidia alone is equivalent to the performance of the entire energy and utility sectors of the S&P 500, combined. Actually, the 53 stocks that make up the energy and utility sectors in the S&P 500 have a combined market cap of $2.69 trillion, so about $25 billion less than Nvidia.
This kind of scale puts Nvidia in a league of its own when it comes to market influence. For example, consider Halliburton — North America’s largest oilfield services company — which has a market cap of $17 billion. Their earnings, no matter how good or bad, will not move the overall market like earnings from Nvidia. But that does not mean that Halliburton’s performance is not important.
I believe it was Harry Truman that is credited with the quote “It’s a recession when your neighbor loses his job; it’s a depression when you lose yours”.
You could argue that the corporate earnings season is the same. The most important earnings report is from the company that has the most impact on your life.
Beyond Wall Street
I would argue that the most important earnings report this season for me personally came on April 23rd, when Oakworth Capital Bank reported “our” earnings. For me, that Oakworth paycheck covers my mortgage, puts food on the table and gives my family health insurance. Nvidia may be 5% of my 401k, but the performance of Oakworth is a heck of a lot more important to me.
And for Halliburton, 48,000 families get their paycheck and health insurance from that company. How many families are getting paychecks from Nvidia? Currently, NVDA has 36,000 employees. To take it a step further, those 53 companies that make up the energy and utility sectors of the S&P 500 employ around 822,000 people.
You could go one step further and look at the S&P 600 small cap index. That entire index has a market cap of $1.29 trillion, or a mere 47% of the value of Nvidia. There are just under 4 million people employed by the companies in the S&P 600. I am not ready to make the argument that the performance of the entire small cap index is only 47% as important as Nvidia. I think the 3,979,999 families that make their living from those companies would agree.
This is not an attempt to pick on Nvidia, or to make any argument on its current valuation. Technology companies historically have a small number of employees relative to their market capitalization. I’m merely pointing out that the effect a company’s performance has on stock indices can differ greatly from its real-world economic impact.
Labor Market
Which brings us to the labor market. The April jobs report, released this morning, offers a clearer picture of the real economy.
- Last month 177,000 new jobs were created, with wages over the past year increasing by 3.8%.
- The unemployment rate remained at a historically low rate of 4.2%.
These are not the stats of an economy about to plunge into a deep recession. All of the uncertainty around the tariff talk may not be built into this jobs report, and are even less likely to have much of an impact on the 1st quarter earnings season that we are now just over halfway through.
This morning’s jobs report does line up with what we see so far from this earnings season. Things are good, not great. Business is strong enough to add an employee or two as needed, but all the tariff uncertainty may make it an inopportune time to implement any significant planned expansion.
So, I may agree that Nvidia is the second most important earnings report this earnings season—just behind the performance of your own employer. Come 3:15pm central time on May 28th, all eyes will focus on Nvidia’s earnings report, and the impact it may have on stock prices. Just remember the hundreds of small and midsize companies that report between now and the 28th collectively can have a powerful impact on the economy, even without the market cap weight of any of the Magnificent 7 giants.
Thank you for your continued support!
Chief Equity Strategist
Please note, nothing in this newsletter should be considered or otherwise construed as an offer to buy or sell investment services or securities of any type. Any individual action you might take from reading this newsletter is at your own risk. My opinion, as well as those of our Investment Committee, is subject to change without notice. Finally, the opinions expressed herein are not necessarily those of the rest of the associates and/or shareholders of Oakworth Capital Bank or the official position of the company itself.