Countdown to Nvidia Earnings, Meta Legal Settlement, Latest OpenAI Exit 8/26/26

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**Brian Sullivan** (1:03)
The key to the rally is on deck. The question is, will it ignite stocks or bring them back down to earth? Welcome to Power Lunch. I'm Brian with Contessa Brewer, Kelly. Out today, the next test for the market is just over two hours away. Nvidia earnings out, the number is expected to be huge, but let's be clear, the report not just about one company, it's a report card for the entire AI infrastructure cycle.

**Contessa Brewer** (1:26)
A blockbuster multi-billion dollar settlement, Meta faces a landmark reckoning settling with 47 states, Washington DC and US territories, over claims its platforms harmed children through addictive design. The deal carries billions in penalties and potentially major product changes. With the stock down nearly 30 percent in a year, is the all clear investors have been waiting for?
Evercore ISI's head of Internet research, Mark Mahaney joins us on that.

**Brian Sullivan** (1:55)
All right. There was a lot to do and we start with the next test for the market. I mean, this is a big one. Nvidia earnings and guidance just about two hours away. Now, Nvidia shares are in a correction. They're down more than 10 percent from the 52-week high and Nvidia matters because, well, it's the largest waiting in the S&P 500, it's the largest waiting in hundreds of ETFs, it's the largest waiting among semiconductors, which say themselves had the largest waiting inside of technology inside of the market.
I really need to switch to decaf. We've talked about this. Joining us out of break it all down, Wells Fargo Chief Equity Strategist, Ohsung Kwon and Interactive Brokers Chief Strategist, Steve Sosnick. Steve, was I too on that? I think Nvidia earnings and our guest agreed in the previous hour, have the power to move everything.

**Steve Sosnick** (2:45)
I say this every quarter and I still mean it. Nvidia is the most important earnings release every quarter. Part of it is for the reasons you just mentioned its size. Part of it is because it's a standalone, because the Mag 7 tends to clump together. So think about in July where you had Microsoft go up 15.5 percent on its earnings, but at the same time, Meta went down 8 percent, so they balanced a little bit against each other. Nvidia, all eyes are on Nvidia because we've got nothing else to watch today.

**Brian Sullivan** (3:14)
I don't want to get too much in the market weeds, but it's not just Nvidia stock, is it? You got Nvidia options, they're huge. But again, there's things like Delta 1 and synthetic strategies that hedge funds use, that we don't talk about on the show, because 0.01 percent of the market uses them, but they're important. So there's all these underlying aspects to Nvidia, and Tesla and some others, by the way, that when the stock moves, explain how it can move a lot of other things, the waterfall effect, if you will.

**Steve Sosnick** (3:46)
Well, if nothing else, Nvidia is at the heart of the AI ecosystem. People have been using the term that it's the central banker for AI, and I don't dispute that. So much relies upon them. Whether you view some of their interlocking deals as a plus or a minus, we could have a whole hour on that debate, and I won't go down that road necessarily, but everything hinges upon them.
If they're not holding up their end of the bargain, if they see weakness on the overall AI trade, we've got some problems, and that's really where the issue comes in.

**Contessa Brewer** (4:16)
So Ohsung, walk us through what you're expecting out of earnings tonight, and does anything that you're going to hear out of earnings change your overall strategy?

**Ohsung Kwon** (4:26)
Yeah, so Nvidia earnings are going to matter, obviously, because to Steve's point, it's really the central bank of the AI ecosystem. I don't know what they could potentially say that would really reverse this negative sentiment that we're seeing in semis, because we know that AI chip demand is still there. CapEx is going much higher. We're talking about potentially $1.5 trillion of CapEx next year. So the market fully understands that, and what the market's been telling us is that there is this rising concern that we are heading into this late innings in terms of this AI CapEx build out. And if you look at semis and hardware as percentage of GDP, we think that could potentially go up to about 3.5% by the end of next year. And that's above the 2.9% peak during the internet bubble, and above the 3% peak during the real world investment cycle about 150 years ago. So this could actually be as big as it gets.