The Effect of Earnings Announcement on the Market Value of Corporate Stock

On June 18, 2024, Nvidia's stock was momentarily crowned as the world's most valuable stock - surpassing other technology companies. Accordingly, this paper aims to analyze the differential effect of Nvidia's earnings announcement on the company's stock price following the earnings announcement. The research is anchored on the prior theory of efficient market hypothesis - which emphasizes the effect of information on stock prices. The paper applied a quantitative differential approach. The earnings announcement was used as the basis for differential stock price analysis because, based on previous literature, results show different (mixed) effects of earnings results on stock price. The data on Nvidia's stock price were collected from Fusion Media and Nasdaq. Data were analyzed using the paired t-test sample for mean difference. Results from the analysis indicate a significant positive difference between the previous 44 days before the profit announcement and 44 days following the profit announcement. The result shows that Nvidia's earnings announcement, which surpassed expectations, catalyzed a huge rise in Nvidia's stock price. It also highlights the best point when the investors should have taken their profit. The results of this study help academics and researchers in business schools better understand the relationship between earnings announcements and stock prices in AI chip manufacturing companies. The paper contributes unique novelty by using extended days before and within the earnings announcement, which provides ample space to understand the stock price performance and to make investment decisions. It thus contributes an insight into the best timing of profit-taking and reinvesting.