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

By Johann M Cherian and Sanchayaita Roy

Aug 27 (Reuters) - The main U.S. 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 .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 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 NVDA.O 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.

Still, Blancato said he expects the report to reflect strong demand for the company's chips from the rest of the world.

At 09:50 a.m. ET, the Dow Jones Industrial Average .DJI rose 82.98 points, or 0.18%, to 45,501.05, the S&P 500 .SPX shed 2.45 points, or 0.04%, to 6,462.39, and the Nasdaq Composite .IXIC lost 58.90 points, or 0.27%, to 21,485.37.

Six of the 11 S&P 500 sectors edged higher, with energy .SPLRCR leading gains with a 1.1% rise.

Microsoft MSFT.O and Meta META.O, the chip leader's top customers, as well as semiconductor stocks Broadcom AVGO.O and Advanced Micro Devices AMD.O, fell 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's 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, with most big brokerages also leaning in that direction.

New York Fed President John Williams said there was a need to stay data dependent before deciding on a move in September, according to a report.

In stocks, MongoDB MDB.O jumped 32.2% after the software-maker raised its annual profit forecast.

J.M. Smucker SJM.N fell 6% after the Jif peanut butter maker missed first-quarter profit estimates.

Advancing issues outnumbered decliners by a 1.4-to-1 ratio on the NYSE and by a 1.4-to-1 ratio on the Nasdaq.

The S&P 500 posted 19 new 52-week highs and one new low, while the Nasdaq Composite recorded 63 new highs and 17 new lows.