NEW OIL AND GOLD—CRYPTO SUDDENLY BRACED FOR 'MOST IMPORTANT' WEEK AFTER FEDERAL-RESERVE-POWERED BITCOIN PRICE SURGE,

 

"We believe the most important week for the stock market this year and potentially in years for the Street will be next week as the godfather of AI [chief executive] Jensen [Huang] and Nvidia have earnings on deck," Wedbush Securities tech analyst Dan Ives wrote in a note to clients seen by Fortune.

According to Ives, Nvidia, whose stock has shot up to rocket it into the second most valuable company in the world in the last year, will post a "mic drop" second quarter on Wednesday, cementing its position as the only game in town for companies looking to buy artificial intelligence chips and GPUs.

More broadly, technology stocks could be boosted by a robust reassurance from Nvidia that this year's AI-led boom is not overheated.

"The stage is set for tech stocks to move higher," Ives added, calling for "another masterpiece quarter" from Nvidia, with analyst consensus of earnings per share of $0.64 on $28.67 billion in revenue for the second quarter, according to estimates compiled by Factset.

Ives believes the market better resembles "a 1995, almost 1996, start of the internet moment and not a 1999 tech bubble-like moment," as Nvidia's chips—hotly in demand at the world's biggest technology companies to train generative AI models—"the new oil and gold in this world."

 The bitcoin price and wider crypto market could be set to ride Nvidia's coattails if it beats expectations—or plunge if it disappoints.

Contrasted to this, "digital gold" bitcoin has remained far more strongly correlated to the stock market—especially tech stocks—than to gold, which hit an all-time high this month.

A June crash in the bitcoin price saw $500 billion wiped from the combined crypto market in just over a month and presaged a short-lived correction in the stock market. 

 

"Since July, we've seen the correlation between bitcoin and equities turn negative, suggesting that bitcoin might not follow traditional markets during downturns. If this trend holds, a recession could boost crypto prices as investors look for alternative stores of value," Andrea Barbon, a finance professor at the University of St. Gallen and crypto expert, wrote in an email.

"That said, the bitcoin-equity relationship has been volatile, so any change in the broader economic landscape could quickly shake things up."

Federal Reserve chair Jerome Powell this week primed the market for a September interest rate cut, saying during a speech at the Jackson Hole, Wyoming, meeting of central bankers that "the upside risks to inflation have diminished, and the downside risks to employment have increased."

However, according to Barbon, with former U.S. president Donald Trump embracing bitcoin and crypto, the price of bitcoin is now, more than ever, tightly correlated to the election chances of the U.S. presidential election in November rather than to tech stocks like Nvidia.

Whereas bitcoin has long been considered a hedge against economic turmoil, its future performance may depend on the upcoming U.S. elections. By far, Donald Trump has been the most crypto-friendly so far, and a second term in the White House could spell regulatory changes to the benefit of digital assets, Barbon said.