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Nvidia (NASDAQ:NVDA) is set to deliver one of its most pivotal earnings reports yet, with investors watching closely to see if AI still has room to run or if the recent shake-up signals a turning point. The stock has been under pressure since Chinese startup DeepSeek unveiled an AI model that competes with US giants while using far fewer chips, triggering a $600 billion wipeout in Nvidia's market cap. While shares have recovered some ground, the key question remains: Is this just a bump in the road, or has Nvidia's dominance in AI computing started to crack?
Wall Street is expecting Nvidia to post over $38 billion in revenue for the quartera staggering 73% jump from last year. The company's major customers, including Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN), and Alphabet (NASDAQ:GOOG), have all reaffirmed their AI spending, reinforcing the idea that Nvidia's chips remain in high demand. But there are red flags. TD Cowen reports that Microsoft is canceling datacenter leases, raising questions about whether hyperscalers are starting to rethink their AI infrastructure investments. Hedge funds have also been selling off tech stocks, signaling caution ahead of the report. Options pricing suggests a potential 8.5% swing in either direction, meaning this earnings call could be a defining moment for Nvidia's trajectory.
At 28 times estimated earnings, Nvidia's valuation isn't as stretched as it once was, but the stock is still under pressure to deliver a blowout quarter. Nearly 90% of analysts remain bullish, pointing to long-term AI tailwinds, but the market wants proof that Nvidia can maintain its growth trajectory despite rising competition. If results fall short or guidance disappoints, a broader selloff in AI stocks could follow. But if Nvidia clears the bar, it could reaffirm its position as the undisputed leader of the AI revolutionsetting the stage for its next leg higher.
This article first appeared on GuruFocus.