Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Wall Street’s faith in the artificial intelligence boom that has powered US equities markets to record highs will be put to the test on Wednesday when $4tn chipmaker Nvidia unveils its hotly anticipated quarterly earnings report.
Nvidia, the world’s most valuable public company, has surged by more than 35 per cent this year, becoming the first group to reach $4tn in market value. It has been a significant contributor to the S&P 500’s 10 per cent rise in 2025 because of its mammoth market value.
Investors are betting that enthusiasm surrounding rapid advancements in AI, which has also boosted companies such as Microsoft, Amazon and Palantir, will continue to be a dominant factor in the coming years.
“It’s not just a single stock,” said Arun Sai, multi-asset portfolio manager at Pictet Asset Management. “It’s very unusual — people read through it to the economy as a whole.”
Nvidia shares were slightly higher on Wednesday afternoon.
Its earnings report — due after the market closes in New York — comes at a time of growing concern over the lofty valuations of companies tied to AI.
The tech-heavy Nasdaq 100 index is trading at about 28 times expected earnings over the next year, well above the 25-year average of 22 times, with Nvidia currently trading at about 41 times its expected earnings, FactSet data shows.
Tech stocks fell last week, as a gloomy report from the Massachusetts Institute of Technology and comments by OpenAI chief Sam Altman cast doubt on the sector’s months-long surge.
Many market participants are viewing Nvidia’s earnings report in the same vein as blockbuster economic reports that often sway markets.
“It’s not just that Nvidia is a large holding for investors,” said Jon Zauderer, head of North America specialist sales at Citigroup. “They are the locomotive of this AI train. There is so much scrutiny of their messaging.”
Daniel Newman, chief executive of The Futurum Group, a research company, echoed that sentiment, saying “an unexpected surprise” — a clear miss on either revenue or guidance — “would be the ultimate and fastest way to send the market into a tailspin”.
Nvidia’s biggest customers, Microsoft, Google, Meta and Amazon, have signalled in recent weeks that they plan to invest huge amounts in AI infrastructure, with spending on track to reach $350bn this year.
Nvidia makes graphics processors that are widely used to train models that underpin products such as OpenAI’s ChatGPT and Google’s Gemini.
Analysts expect Nvidia to report $46bn in revenue for its July quarter, according to a FactSet poll. Market expectations have climbed steadily since June, as the tech sector’s multi-month gains have further lifted hopes for Nvidia’s performance.
If analysts’ predictions prove to be correct, that would put revenue growth at 54 per cent year-over-year, strong for a large, established company, but still a drop from the previous quarter’s 69 per cent and well below the more than 250 per cent recorded in early 2024.
Joseph Moore, a semiconductor industry analyst at Morgan Stanley, said markets should not be overly concerned with the slowdown in revenue growth.
“People will be more focused on growth relative to peers, and right now they are doing very well in that regard. The market is comfortable with where they are from a growth standpoint,” he said.
Another factor that will be watched closely by analysts is Nvidia’s outlook for the China AI chip market. An unconventional deal with the Trump administration earlier this month saw Nvidia agree to pay 15 per cent of sales to the government in exchange for a licence to sell its watered-down H20 chips in China.
But the company has to navigate a political backlash against the chips in Beijing, as well as mobilise its supply chain to start producing them again at volume.
“You never know where expectations are [around Nvidia] — typically the whisper numbers are higher,” said Stacy Rasgon at Bernstein, pointing to a phenomenon where traders expect numbers that are different from Wall Street’s consensus forecasts.
He added that while China chip sales have been a relatively small fraction of Nvidia’s revenue in the past, and have been phased out of its guidance for the time being, “investors will be asking: are they actually making stuff for China, or are they not?”
Strong results have not always translated into strong returns for shareholders, or broad optimism for the market.
After Nvidia beat the market’s expectations for profit and revenue in February, the stock dropped 8.5 per cent the following day.
Those results came at a time when markets were uneasy about advancements by China’s DeepSeek, which claimed to achieve similar performance to US rivals but with less expensive chips.
“At these valuations, both things matter: the macro outlook and Nvidia’s own performance, or the micro,” said Moore at Morgan Stanley. “[In February] people were questioning the macro and micro conditions . . . [but now] it should be a very strong result.”
