Nvidia Earnings: Brace for Volatility Amid AI Trade Uncertainty

Nvidia’s upcoming earnings report is set to be a pivotal moment for the AI sector, following the company’s underwhelming performance at the start of the year. Despite the potential for the chip giant to exceed Wall Street’s high expectations, the stock’s future remains uncertain due to ongoing concerns about China’s AI startup DeepSeek, slowing growth, and export restrictions. This uncertainty is prompting Wall Street to anticipate significant volatility.

Raymond James’ chief market strategist, Matt Orton, expects “significant volatility” in the wake of the earnings report, a pattern that has played out in previous quarters. The options market predicts a 7% swing in Nvidia shares, which could equate to a $230 billion shift in market value. However, this volatility might persist longer than usual, according to BayCrest’s David Boole, who suggests the stock could remain volatile for a month post-earnings.

Nvidia’s stock performance has notably slowed, with shares up only 0.9% year-to-date and down 3.9% in the past month. This deceleration contrasts sharply with the company’s 171% surge in 2024, which contributed significantly to the S&P 500’s gains. Meta has now overtaken Nvidia as the S&P 500’s top contributor, accounting for 13% of the benchmark’s year-to-date gains compared to 5% from Nvidia.

Despite the near-term challenges, many analysts remain optimistic about Nvidia’s long-term prospects. Bank of America’s Vivek Arya highlights headwinds in the current quarter but anticipates strong long-term growth driven by new product launches and market expansion into robotics and quantum technologies.

For investors, the key takeaway is to prepare for volatility and consider diversifying into other AI-related sectors. Raymond James’ Matt Orton recommends software and cybersecurity stocks as top bets for the AI sector’s next phase, citing increased corporate investment and the rising number of hacks.

Nvidia is scheduled to report earnings after the market closes on Wednesday, February 26, with revenue expected to rise 73% year over year, a significant slowdown from the 265% growth reported a year ago.