Nvidia’s third quarter results, set to be announced after US market closes on Wednesday, will be a litmus test for the AI boom that has propelled global equities to record highs.
The chip titan, which now accounts for roughly seven per cent of the S&P 500 by market cap, has seen its shares surge more than 1,200 per cent over the past five years.
But after a 10 per cent drop since early November, investors are beginning to question whether the AI boom can sustain its blistering pace.
US tech stocks are stabilising after a multi-day sell off driven by concerns over lofty AI valuations and the sustainability of cosmic spending.
The S&P 500 rose 0.1 per cent and the Nasdaq 0.2 per cent in early trading, but markets remain jittery ahead of Nvidia’s earnings, which is broadly expected to show another strong quarter.
Revenue has been projected at around $54.9bn, up 56 per cent year on year, with adjusted earnings per share expected near $1.25, driven by data centre sales and a soaring demand for AI chips.
Options data suggested the market is bracing for a roughly seven per cent swing in either direction, proof of the firm’s chokehold on the market.
A strong beat and confident guidance could restore investor confidence in AI equities, while any signs of weakness could, alternatively, accelerate a market correction.
Global sentiment hangs on Nvidia
Analysts have noted that Nvidia’s results are not just about Jensen Huang’s firm.
Rather, the stock’s performance has become a proxy for the broader AI sector, influencing everything from the S&P 500 to cryptocurrencies.
“Nvidia’s results have become a macro event”, according to Kenneth Lamont, principal at Morningstar.
“It’s the poster child for AI investment, but the volatility shows the sector’s sensitivity to growth assumptions and competition.”
Matt Britzman, senior equity analyst at Hargreaves Lansdown, also said: “An earnings beat and guidance raise feels like the likely outcome, but investors should focus on the business performance rather than short-term market reactions.”
The sceptics are out there
Yet, scepticism remains, with billionaire investors like Michael Burry and Peter Thiel reducing, or exiting, positions in the company, reflecting caution over stretched valuations.
Meanwhile, strategic partnerships between Big Tech Nvidia, Microsoft, and Anthropic prove the intense global race to secure AI infrastructure and talent.
With AI spending and valuations at unprecedented levels, the debate is swelling over whether the sector is entering a new era of sustainable growth or a speculative bubble.
As Nvidia reports its third-quarter earnings, all eyes will be on chief Jensen Huang’s outlook for AI infrastructure spending and the company’s blackwell chip rollout.
A strong performance could reignite bullish sentiment in tech and risk assets, while any caution could otherwise ripple across global markets.
As Bob Diamond, head of Atlas Merchant Capital, claimed: “We’ve seen risk assets repriced. Nvidia will be the litmus test for whether the AI rally has legs or is due for a sharper correction.”