Market focus this week: Can NVIDIA Corporation's (NVDA.US) financial report revive the US stock market's "AI belief"? US January PCE data is expected to ease inflation concerns.

Due to concerns about lower-than-expected US economic growth and persistently high inflation triggered by a series of economic data, US stocks performed poorly in the past week. The S&P 500 index fell by about 1.7% last week, while the Nasdaq Composite Index and the Dow Jones Index saw declines of about 2% and nearly 3% respectively. In the coming week, the earnings report of NVIDIA Corporation (NVDA.US) is expected to be the headline news. Earnings reports of Home Depot, Inc. (HD.US), Lowe's Companies, Inc. (LOW.US), and Salesforce, Inc. (CRM.US) will also be in focus. In terms of economic data, investors will closely watch the US January PCE price index data to be released on Friday, which is a favored inflation indicator by the Federal Reserve that will reveal the inflation situation. Meanwhile, the market will also pay attention to the revised annualized quarterly rate of US real GDP for the fourth quarter to be released on Thursday. Inflation Due to inflation still being higher than the Federal Reserve's target and a strong labor market foundation, the market is betting that the Federal Reserve will not cut interest rates by the first half of 2025. The US January PCE price index data to be released on Friday will reveal the latest situation of US inflation. Economists expect the US January core PCE price index to increase by 2.6% year-on-year, lower than the previous value of 2.7%; the US January PCE price index is expected to increase by 0.3% month-on-month, higher than the previous value of 0.2%. Due to differences in components, it is expected that the rate of price increase in January shown by the US January core PCE price index data will be more moderate than that shown by the US January CPI data. Michael Gapen, Chief US Economist at Morgan Stanley, pointed out that the 2.6% increase in the US January core PCE price index year-on-year "implies a substantial decrease in the core inflation rate over the past 12 months," which is consistent with their prediction of a 25 basis points rate cut by the Federal Reserve in June. NVIDIA Corporation Earnings Report The artificial intelligence chip giant will announce its fourth-quarter performance after the US market closes on Wednesday. Wall Street analysts predict that NVIDIA Corporation's Q4 revenue will increase by 73% year-on-year to $38.26 billion, and adjusted earnings per share will increase by 63% year-on-year to $0.84. The key points of this earnings report will focus on whether the AI data center business can continue its growth trend, whether the Blackwell GB200 architecture product production progress is facing technical delays, the market transition pace of GPU products, and the strategic judgment of the company's management on the commercialization of AI applications globally. In addition, as the emergence of the DeepSeek-R1 "low-cost + high-performance" open-source model has prompted a reassessment of the demand for large-scale AI model computing power in the market, investors will also focus on NVIDIA Corporation CEO Jensen Huang's views on the demand environment for artificial intelligence chips. It is worth mentioning that Jensen Huang recently stated that the launch of the DeepSeek-R1 model will not suppress AI computing demand, but may instead serve as a catalyst to stimulate the market's pursuit of efficient AI architectures and drive the technological iteration of the entire AI industry. He emphasized that although the efficiency of pre-training models continues to improve, the computing power consumption in the AI inference phase, as a core stage of practical application, is incompressible. So far this year, most of the "seven giants of US stocks," including NVIDIA Corporation, have lagged behind the S&P 500 index and have not contributed as much to the benchmark stock index as they have in the past two years. Bank of America Corp analyst Vivek Arya said, "NVIDIA Corporation's stock price may fluctuate after the earnings announcement, but we expect the positive momentum to return as investors anticipate NVIDIA Corporation to unveil the GB300 product line at the upcoming GTC conference and potentially expand into markets such as Siasun Robot & Automation and quantum computing technology." Market Uncertainty Although US stocks have shown resilience in response to a wealth of headline news about US President Trump's policies, various survey data indicate a sense of concern. Data released last Friday showed that the final value of the University of Michigan consumer confidence index for February fell to 64.7, the lowest level since November 2023. At the same time, the economic output measured by the US February SPGI Composite PMI fell to the lowest level in 17 months. Concerns about tariffs and their possible inflationary effects are at the core of these two survey data. Chris Williamson, Chief Economist of Market Intelligence at S&P Global, Inc., stated, "The optimism among US businesses at the start of the year has evaporated, replaced by heightened uncertainty, stalled business activity, and dim prospects of rising prices. Companies are generally concerned about the impact of federal government policy, including spending cuts affecting companies like GEO Group Inc." He added that US business optimism for the next year has fallen to "the most pessimistic level since the pandemic." Despite the decline in US stocks last week, they still hover near historic highs. Scott Chronert, US Stock Strategist at Citi, stated that as US stock valuations approach historic highs, more volatility may be expected on the path to an upward trend in 2025 as investors try to digest the impact of Trump's policies. He said, "We believe there is still upside potential for the S&P 500 index by the end of 2025, but there may be a period of sustained volatility. However, pullbacks can provide us with better entry points."