Nvidia’s Results Face a Market Growing Cautious on AI Investment

Wall Street is about to get a clearer picture of where the massive wave of artificial intelligence spending is actually headed when Nvidia Corp. releases its quarterly results after Wednesday’s closing bell. But how a shaky stock market will respond to the report is an entirely separate uncertainty.

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“This is one of those moments where Nvidia’s numbers could set the tone for the entire market,” said Scott Martin, chief investment officer at Kingsview Wealth Management, which holds Nvidia and multiple other mega-cap tech names.

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Analysts anticipate that the chipmaker will post more than 50% growth in both net income and revenue for its fiscal third quarter. The driver is simple: major tech players Microsoft, Amazon, Alphabet and Meta which collectively account for over 40% of Nvidia’s revenue, are projected to boost their combined AI spending by 34% over the next year to roughly $440 billion, according to data.

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The challenge is that these forecasts could fall apart if the largest AI buyers especially privately held OpenAI scale back their commitments.
“These companies have repeatedly raised the expectations bar, and now they’re boxed into delivering not just strong results, but results that keep beating the market’s rising hopes,” said Michael O’Rourke, chief market strategist at Jonestrading. “It’s a risky strategy for any publicly traded company.”

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If the tech giants stick to their aggressive AI goals, Nvidia stands to gain. And historically, when Nvidia thrives, the broader market benefits as well. It remains the heaviest-weighted company in the S&P 500 and the centerpiece of the AI trade that has propelled equity benchmarks to consecutive records over the past year.

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But anxiety around the sustainability of AI spending has been building, especially with Nvidia shares sliding more than 12% from their peak four weeks ago. That means the market’s reaction will hinge on how investors interpret every detail of the report.

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“There are definitely investors who believe that if Nvidia posts strong results and signals accelerating demand, then the broader market will stabilize,” said Kingsview’s Martin. Nvidia shares inched higher in early trading Wednesday, gaining around 0.9% before the bell.

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A strong set of earnings coupled with an upbeat outlook could give investors much-needed breathing room. Concerns have been swelling over AI stock valuations, the opaque financing structures involved in AI deals and the enormous costs of AI infrastructure that have yet to translate into clear returns. These worries have weighed on both tech names and the broader market, dragging the S&P 500 into its sharpest four-day pullback since April.

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Still, despite the recent slump, Nvidia shares are up 35% this year more than double the Nasdaq 100’s roughly 17% return. The correction has also made Nvidia’s valuation look more reasonable. The stock now trades at about 29 times forward earnings, well below its decade-long average of 35 and only slightly above the Nasdaq 100’s multiple of roughly 26.

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“At 30 times earnings, Nvidia doesn’t look out of line at all given its growth trajectory,” Martin added. In terms of the results themselves, investors want to see robust performance from Nvidia’s Blackwell product line, which is expected to fuel the company’s next phase of expansion. Margin growth particularly in the data-center division that made up nearly 90% of second-quarter revenue will also be closely watched. But as is often true with AI-related stocks, Wall Street’s judgment will hinge heavily on forward guidance.

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“We’re expecting a pretty solid report,” said Jake Seltz, portfolio manager at Allspring Global Investments, which holds a sizable Nvidia position. Seltz said he’ll be paying close attention to the company’s outlook for the next quarter. Revenue guidance, he expects, could come in above consensus, though “it’s impossible to know whether they’ll offer a conservative forecast.”

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Analysts ultimately see Nvidia’s explosive growth moderating in the years ahead. Revenue is expected to rise nearly 60% in fiscal 2026, followed by 41% in 2027 and 22% in 2028.

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Even if Nvidia delivers the strong results Wall Street expects, it may not immediately translate into stock gains given the shifting mood among investors.
“The key debate right now is the true size of the total addressable market for all this AI infrastructure,” said Melissa Otto, who leads technology, media and telecom research at Visible Alpha.

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Some large investors have already pared back. Peter Thiel’s hedge fund unloaded its entire Nvidia position in the third quarter, and SoftBank exited as well to free up capital for other AI opportunities. Scion Asset Management run by Michael Burry of “The Big Short” fame disclosed put options on Nvidia as Burry warned of an emerging AI bubble.

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More broadly, an analysis of 13F filings from 909 hedge funds showed a near-even split between managers adding to and trimming their Nvidia stakes in the third quarter. It’s still unclear how much of that selling reflects strategic profit-taking rather than a negative view on Nvidia or the AI landscape.

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“Nvidia has been a phenomenal stock,” Otto said. “It’s not shocking to see investors lock in some gains and reassess where the next phase of growth will come from.”

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