• If Nvidia fails to deliver on its fourth-quarter earnings, it could cause a wider correction in equities as well as crypto.
  • AI-related tokens like OCEAN and FET could also affect Nvidia’s earnings or outlook in the sector.

BTC Price Index and Live Chart – CoinDesk”>(BTC) and the broader crypto rally could come to a halt if Nvidia’s (NVDA) fourth quarter earnings fail to live up to the lofty Wall Street expectations, Singapore-based QCP Capital said in a recent note.

QCP said in a report that Nvidia’s earnings, which are due to be released today after the US closing time, could cause a larger correction. Nvidia, as a large part of the S&P500 Index could set the tone in the short-term for US stocks.

Nvidia will report its earnings after the U.S. market closes on Wednesday. The stock of the chip maker has risen by nearly 220% in the past year. The market will focus on whether the stock can sustain its face-melting rise. Goldman has even referred to it as “the most important company on the planet” , with options traders betting on an 11% move either way.

QCP stated that “Nvidia’s current P/E ratio is 90x and Q4 earnings have been revised higher in recent times.” According to FactSet, Amazon.com is currently trading at 52.4x, while Tesla (TSLA), at 57.7x.

The margin of error for a valuation this high is extremely small. At these valuation multiples, and with high expectations for earnings, any disappointment may lead to a sell-off. This would also put pressure on the prices of U.S. stocks and cryptos,” QCP added.

Nvidia Price vs. BTC (TradingView).

Nvidia earnings could also cause a volatile session in the crypto-sub-sector of artificial intelligence (AI)-related tokens, such as Ocean Protocol’s OCEAN or Fetch.AI’s FET. Crypto traders will keep an eye on Nvidia’s sentiment on the AI sector, given the chipmaker’s influence.

AI Tokens Rally As OpenAI’s Sora Renews Hope for the Sector

Analysts point out that Nvidia’s growth is also heavily dependent on the server industry, which is at the heart of the AI revolution.

According to IDC, the global PC market faces short-term challenges. In 2023, shipment volumes are expected to drop by 13.8%, following a 16.6% decline in 2022. This marks two consecutive years with double-digit declines.

IDC predicts that a rebound will begin in 2024. This is due to factors like a refresh cycle for commercial PCs, AI integration and the recovery of consumer installed bases. These factors are expected to lead a projected 3.4% growth in 2024 as well as a compounded annual growth rate (CAGR) of 3.1% between 2023 and 2027.

Digitimes Research , a Taiwan-based company, recently published stating that the growth of the computing industry will plateau because the PC and notebook market is saturated. However, emerging data centers, such as Nvidia’s, are crucial to the future success of the chip companies, increasing server shipments and HPC chips demand.

Nvidia stock has dropped 7% over the past week, and currently trades at around $680. FactSet data shows that the majority of Wall Street analysts rate the stock as a buy, with an average price target of $751 for the next 12 months.

According to CoinDesk Indicies data Bitcoin is currently trading at $51,200 and is down 0.4% over the past 24 hours. The CoinDesk 20 Index, which measures performance of the 20 largest digital assets, has fallen 1.9%.

Read more: Bitcoin options Trader Bets $20M to hedge against prices dropping to $47K

Aoyon A. Ashraf is the editor.