The Most Important Earnings This Week Isn’t NVIDIA

Walmart, not NVIDIA, reveals where the U.S. economy is actually heading. Here’s why Thursday’s earnings matter more than any AI stock.

KEY TAKEAWAYS

• Walmart–not NVIDIA–reveals the real state of the US consumer and near-term economic direction

• Same-store sales, inventory growth, gross margin, and operating margin are the four essential KPIs to watch

• AI-driven tech growth matters for the long-term, but tells you almost nothing about household financial health today

• Tariffs and price sensitivity will show up in Walmart’s report before they appear in government data

• Walmart’s earnings will shape the next 12 months far more than NVIDIA’s earnings will

MY HOT TAKES

• Investors are too fixated on NVIDIA and completely underestimating Walmart’s macro importance

• Walmart remains the most reliable, real-time indicator of consumer stress

• Tariffs are likely pressuring margins more than analysts expect

• The consumer may be weaker than headline economic data suggests

• Markets are mispricing near-term risk by ignoring retail fundamentals

• You can quote me: “If you want to know where the economy is heading, don’t look up at the shiny skyscraper–look down at the lowly shopping cart.”

Eyes on the ball. It’s an old adage that applies to all sports and beyond. You want to make money in your investment account, don’t you? Of course you do. You research and find the companies that have the greatest potential for future growth. In some cases, those companies will even pay you a dividend to take the ride with them whilst you await those great gains. I have been writing a lot about long-term focus lately, and I am sure that you know why; you just have to look at market performance over the past few weeks. I really urge you, up front, to go back and look at my note or watch my video on the probabilistic benefits of focusing on long-term gains–it’s not a guess, a gut feeling, or an assertion–it’s real numbers! It’s math!

Well, in case you missed it, this is a big week for equities. Some even refer to it as an inflection point for the bull market. Equity indexes have largely been powered to highs by mega cap tech companies, specifically those involved in the AI ecosystem. We won’t get into the reasons or the validity. For now, it’s just facts. Imagine a towering skyscraper that touches the clouds. Every day a new floor is added to the top. Now imagine that it stands only on 3 pillars! If anything challenges the structural integrity of any of those pillars… well, you know what can result. That is kind of what the broader indexes are facing these days. To be fair, let’s just say one pillar–NVIDIA. 

NVIDIA is really at the very heart of the AI revolution which offers us a once-in-a-generation seachange in productivity. AI is the nexus of all the technology innovation of the last 40 years–computing, software, semiconductors, networking, internet–all of it formed into generative AI. Yeah, it’s that big. Now, we are just seeing the tip of the iceberg, and it’s fabulous, but it will take time for us to realize its full impact–a long time. And, by the way, it’s not going to happen in a straight line. There will be hurdles along the way. WE ARE NOT IN AN AI BUBBLE–we are at the beginning of a great expansion. It will take patience–investor patience–to enjoy the full ride. Basically folks, stop asking if we’re there yet! We’re not!! Now, I agree that tomorrow’s NVIDIA earnings can derail the already shaky year-to-date rally, but I think that most folks are missing the bigger picture.

If you want to know what is going to happen to your portfolio, or more broadly, your financial situation over the next year, you need to ignore all the BS hype around NVIDIA’s earnings, AI bubble, bloated CAPEX, etc. You need to look past tomorrow’s NVIDIA earnings and on to Thursday’s Walmart earnings. That’s right. Humble, boring Walmart. You will learn far more about the state of the economy from new Walmart CEO John Furner than you will learn from the leather-clad NVIDIA CEO Jensen Huang!

Why? Because NVIDIA gives you a vision of the future–the long arc of innovation, the capital expenditure super cycle, the expansion of inference, and the monetization runway that stretches out for years. All great. All exciting. But none of that tells you one single thing about what is happening in the American household right now. NVIDIA tells you where the world might be in 2027. Walmart tells you where the world actually is today. Walmart is Main Street distilled into a single ticker symbol. You want to know how consumers are feeling? Price sensitivity? Substitution patterns? Trade-down? Job market stress? Household cash flow strain? You will find all of it sitting quietly inside Walmart’s quarterly report, surrounded by end caps, laundry detergent, and $4 rotisserie chickens (hint, it may be more than $4 by the time you get to the store 🤣). Here are a few things you should be looking at from Walmart.

Let’s start with the obvious: same-store sales. This is your real-time pulse check on consumption. Walmart’s customer base is broad, but heavily skewed toward the lower and middle-income consumer–the group that always feels recession first. When same-store sales slow, you know discretionary spending is fading. When traffic drops, you know households are tightening. When the average ticket declines, you know price sensitivity is increasing. NVIDIA can beat earnings by a billion dollars, and it won’t tell you any of this. Walmart will hand you the truth on a platter.

Then there’s inventory growth, the most underrated recession indicator in all of retail. Inventory is managerial honesty. You can spin a press release or craft the perfect shareholder letter, but inventory exposes the truth every single time. Rising inventories against slowing sales? That’s a demand problem. Sharply falling inventories? That’s fear. Too much inventory? That’s forced discounting in the following quarter. Too little? That’s a manager bracing for softer conditions. Walmart’s inventory tells you exactly where broad consumer demand is headed long before the economists update their models.

Next up: gross margin. This is where tariffs–everyone’s favorite topic–land. When tariffs hit, they hit Walmart before they hit anybody else. Think about it, Walmart sells almost everything Americans consume, and much of it comes from abroad. If a tariff raises costs by even a few percentage points, Walmart has a choice: pass the price hike to consumers (who may revolt) or eat the cost (which kills margins). Either outcome is inflationary, either for the consumer or for corporate profits. If gross margins compress this quarter, you have your answer: tariffs are biting. NVIDIA’s earnings tell you nothing about tariffs. Walmart’s margins tell you everything.

And finally, the one key performance indicator (KPI) that binds the entire macro story together: operating margin. This is where you see the full economy at work–labor costs, shrinkage, supply chain efficiency, price elasticity, digital fulfillment losses, and mix shift between grocery and general merchandise. If operating margins deteriorate, the consumer is weakening faster than Powell and his band of merry, gray bankers realize. If they improve, the consumer is holding up, and the economy may have more cushion than the headlines imply.

Taken together, these four charts 🙃 paint a remarkably clear picture of the crossroads Walmart, and by extension, the US consumer, now stands at. Same-store sales have been grinding lower for nearly two years, and the dashed-line estimates suggest further softening unless something meaningfully changes in household demand. Inventory growth, meanwhile, has quietly crept higher, never what you want to see when comps are slowing (not shown in chart), with the projected path hinting at managers bracing for weaker sell-through. Gross margins have recovered nicely from last year’s dip, but the question now is whether that upward trend can continue in the face of fresh tariff pressure or whether consumers will finally revolt against higher prices. And operating margins? Volatile, improving, but still fragile. Just one bad quarter away from telling a very different story about the health of the retail ecosystem. The dashed lines across all four charts underscore the same point: the next print from Walmart will tip the scales one way or the other.

My friends, plainly: Walmart is the economy. When Walmart speaks, economists should listen. If you want to gauge the next twelve months–not twelve years–Walmart is your window. NVIDIA is a marvel of innovation, but NVIDIA will not tell you if the average family can afford groceries, school supplies, or socks. Walmart will. NVIDIA will not tell you if tariffs are squeezing household budgets or if consumers are trading down to store brands. Walmart will. NVIDIA will not tell you if people are skipping discretionary purchases, cutting back on clothing, or delaying appliance upgrades in favor of…food. Walmart will.

I am not downplaying NVIDIA’s importance, not even close. I have said repeatedly that we are in the very early stages of a massive AI expansion. NVIDIA will continue to be one of the most consequential companies on the planet for long into the future. But the economy? Your income? Your spending power? Your near-term market performance? NVIDIA has almost nothing to say about that. Walmart has everything to say.

So as the financial media works itself into a frenzy over NVIDIA’s print tomorrow, I want you to keep your eyes on the ball. Watch NVIDIA, sure, it will move markets. But understand Walmart. That’s where you’ll find the clues that matter for your wallet, your portfolio, and your 2025 outlook.

You want to know where the economy is really heading? Don’t look up at the skyscraper. Look down at the shopping cart. Walmart will tell you what’s coming long before Wall Street figures it out.

YESTERDAY’S MARKETS

Stocks pulled back yesterday as investor indigestion fueled profit-taking ahead of

tomorrow' s much-anticipated NVIDIA earnings release. 10-year yields were unchanged to slightly lower as nervous investors sought safe havens in rough seas. Crypto pressure continued underscoring investor discomfort.

NEXT UP

• Initial Jobless Claims (October 18th delayed) released on Govt website came in at 232k, higher than the 221k last reported by DOL in September.

• ADP NER Pulse - the new weekly ADP report that shows 4-week moving average of hires/releases.

• NAHB Housing Market Index (Nov) is expected to come in unchanged at 37.

• Factory Orders (August) are expected to have climbed by 1.4% after slipping -1.3% in the prior month.

• Fed speakers today: Barr, Barkin, and Logan.

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