Nvidia Corp.’s upcoming earnings report is poised to determine if artificial intelligence can reclaim its position as a primary driver of Wall Street gains or if it will lead to further declines after the so-called Magnificent Seven tech stocks have slipped into correction territory. As a leader in AI chips, Nvidia’s fourth-quarter earnings, set to be released after Wednesday’s market close, are particularly crucial, especially following the recent rise of China-based startup DeepSeek, which has complicated the outlook for AI infrastructure demands.
Although Nvidia’s stock has shown some upward movement this month, it remains below levels seen before DeepSeek’s emergence. Investors appear more hesitant to purchase during this dip compared to previous downturns, and hedge funds have recently offloaded tech stocks. Notably, this will be the first time since 2022 that Nvidia reports earnings with its shares down from the last report.
“DeepSeek has made it clear that Nvidia is not infallible,” remarked Shana Sissel, chief investment officer at Banrion Capital Management, who anticipates lackluster results from the chipmaker this quarter. Options data suggests that the expected stock movement following the report could be around 8.5% in either direction. “Other tech companies that have reported recently have been generally pessimistic, and in some cases, their AI divisions were among the most disappointing,” she continued. “I feel quite cautious and am not particularly optimistic that this report will reflect the strong performance we’ve seen from Nvidia over the past year and a half. This could potentially trigger a significant selloff.”
The rise of DeepSeek in January has disrupted one of Wall Street’s most reliable assumptions: that advancing AI would necessitate substantial investments in computing power and related infrastructure, particularly the types of chips that Nvidia specializes in. DeepSeek claims to deliver performance comparable to U.S. models while utilizing significantly fewer chips and less computing power.
Recent challenges for tech stocks were compounded by a report from TD Cowen indicating that Microsoft Corp. has begun to cancel leases for a significant amount of datacenter capacity in the U.S. This move may signal concerns about whether the company is overbuilding its AI computing capabilities for future needs.
