Nvidia Earnings Preview: AI Demand vs. Investor Skepticism - What to Watch Next Week

Tech

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Updated on 16 Nov 2025, 11:17 am

Nvidia's upcoming earnings update is poised to be a significant event, potentially shaping the narrative around artificial intelligence (AI) investments. Following its impactful Q2 2023 report, which signaled a new era for AI development and boosted the Nasdaq Composite, investors are now facing renewed skepticism.

This skepticism centers on the actual return on investment from the billions poured into AI and when this spending will translate into meaningful profitability. This concern has already affected major tech players; for instance, Meta Platforms saw its stock fall after announcing increased AI spending alongside mixed earnings. An index of the "Magnificent Seven" tech companies has also experienced a decline, with the S&P 500 on pace for a poor November performance.

Companies like Oracle and CoreWeave, which rely on leasing AI data centers, have faced pressure in both equity and credit markets due to increased borrowing for lower-margin business. Bank of America analyst Vivek Arya notes Nvidia faces a tough task meeting high earnings expectations amid high skepticism about AI capital expenditure (capex).

Nvidia's position in the AI ecosystem is unique; it's not just building AI services but is a primary supplier of the foundational hardware. The company boasts a robust revenue model, a strong double-A credit rating, and is projected to generate over $70 billion in net income this year. CEO Jensen Huang has indicated potential sales of around $500 billion for its Blackwell and upcoming Rubin chips through 2026, suggesting strong demand visibility.

However, investor confidence could be challenged by factors such as potential U.S. restrictions on selling advanced chips to China, and the risk that major customers might reduce data center expansion plans or opt for cheaper alternatives from rivals like Advanced Micro Devices. Options traders are pricing in a significant swing for Nvidia's stock, reflecting the market's uncertainty.

Analysts offer mixed views. Wedbush's Dan Ives remains optimistic, seeing Nvidia's outlook as a validation of the AI revolution. Conversely, Gene Munster of Deepwater Asset Management highlights a "Catch-22": strong guidance might amplify overspending worries, while modest guidance could signal normalizing growth. The market's reaction hinges on whether Nvidia's update can assuage these fears and restore confidence in the AI trade.

Impact: Nvidia's earnings report and forward guidance will be a crucial indicator for the future of AI investment, influencing the valuation of technology stocks globally. A strong performance could boost market sentiment, while weaker-than-expected outlook or significant cautionary notes could trigger further sell-offs in the tech sector. Rating: 8/10

Difficult Terms: - Artificial Intelligence (AI): Technology enabling computers to perform tasks requiring human intelligence like learning and problem-solving. - Revenue forecast: An estimate of a company's expected future income. - Wall Street's estimate: Projections by financial analysts about a company's financial performance. - Nasdaq Composite: A stock market index tracking over 3,000 stocks on the Nasdaq exchange, heavily weighted towards technology. - Skepticism: Doubt or disbelief about the likelihood of something happening or being true. - Profitability: A business's ability to generate earnings or profit. - Magnificent Seven: Seven large-cap technology stocks (Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta Platforms, Tesla) that have driven significant market gains. - S&P 500: A stock market index tracking the performance of 500 of the largest U.S. companies. - Equity and credit markets: Equity markets deal with stocks; credit markets deal with debt (loans, bonds). - Double-A credit rating: A high rating indicating strong financial health and low risk of default. - Net income: Total profit after deducting all expenses, taxes, and interest. - Hyperscaler customers: Very large cloud computing providers (e.g., AWS, Azure, Google Cloud) serving massive user bases. - Options traders: Individuals or institutions trading options contracts, which grant rights but not obligations to buy or sell assets. - AI bubble: A situation where AI company valuations inflate far beyond their intrinsic value, risking a sharp correction.