Aug 27 (Reuters) - U.S. stock index futures were flat on Wednesday as investors awaited AI leader Nvidia's earnings, expected to test the momentum of Wall Street's broader technology-led 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.
The company's results come when traders have been worried the tech sector (.SPLRCT), - which makes up nearly 50% of the S&P 500 (.SPX), - might be overvalued. Valuations of the benchmark index are well above long-term averages, according to data compiled by LSEG.
The concerns weighed on technology 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.
Shares of Nvidia (NVDA.O), edged up 0.7% in premarket trading and its earnings are expected after markets close. 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 how its recent revenue-sharing deal with the U.S. government will affect forecasts.
"In the same way Apple symbolized the smartphone era, Nvidia now defines the AI era. The stock has become the heartbeat of the market," said Josh Gilbert, market analyst at eToro.
"Regardless of whether you own Nvidia shares or not, its result will impact your portfolio in some way."
At 07:06 a.m. ET, Dow E-minis rose 11 points, or 0.02%, S&P 500 E-minis were up 2 points, or 0.03%, and Nasdaq 100 E-minis added 8.25 points, or 0.03%.
Microsoft (MSFT.O), and Meta (META.O), the chip leader's top customers, were broadly subdued, while semiconductor stocks Broadcom (AVGO.O), and Advanced Micro Devices (AMD.O), rose marginally.
Markets were also stabilizing following an initial decline on Tuesday, after U.S. President Donald Trump attempted to fire Federal Reserve governor Lisa Cook.
The move is likely to face legal challenges. If successful, it could allow Trump to nominate a dovish-leaning official to the central bank board, posing a challenge to the independence of the U.S. Federal Reserve.
Investors are pricing in a 25-basis-point interest-rate cut in September, according to data compiled by LSEG, and most big brokerages also lean in that direction.
Richmond Fed President Thomas Barkin is scheduled to speak later in the day and his comments will be scrutinized for his monetary policy perspectives.
In stocks, MongoDB (MDB.O), jumped 30.7% after the software-maker raised its annual profit forecast.
Cracker Barrel (CBRL.O), gained 6.3% after the restaurant chain said it would stick with its decades-old logo as plans for a new one faced social media backlash.
J.M. Smucker (SJM.N), fell 4.1% after the Jif peanut butter maker missed first-quarter profit estimates.
Kohl's (KSS.N), surged 15% after the U.S. department store chain raised its annual profit forecast.
Reporting by Johann M Cherian and Sanchayaita Roy in Bengaluru; Editing by Pooja Desai
