Wall Street mixed in countdown to Nvidia results; tech valuations in focus

(Reuters) - The main US stock indexes were mixed on Wednesday as investors took a breather ahead of Nvidia's earnings, which are expected to test the momentum of Wall Street's AI-driven rally.

The chip major was at the forefront of the market recovery after April's lows, crossing the $4-trillion market capitalization mark in July to become the world's largest company as investors continued to bet on the global demand for artificial-intelligence infrastructure.

Traders worry the technology sector - which makes up nearly 50% of the S&P 500 - might be overvalued. Valuations of the benchmark index are well above long-term averages, according to data compiled by LSEG.

The concerns weighed on tech stocks last week, after OpenAI CEO Sam Altman spoke of a potential bubble and a study from the Massachusetts Institute of Technology showed AI tools boosted individual productivity, not corporate earnings.

Nvidia slipped 1% ahead of its earnings, expected after markets close, while the broader S&P 500 tech sector lost 0.4%. Options traders are pricing in about a $260-billion swing in the chipmaker's market value after the results.

The impact of the Sino-U.S. trade war on the company's significant China business earlier this year will be closely watched, along with the effect on forecasts from its recent revenue-sharing deal with the U.S. government.

"It seems to be quite challenging to understand what is the ultimate impact of Nvidia in China, because we don't exactly know if the Chinese are happy with the chips they're getting and if they are going to continue to buy more," said Phil Blancato, chief executive officer of Ladenburg Thalmann Asset Management.