Bloomberg: AI skepticism clouds Nvidia's stock slump, explosive earnings may be of no avail

NVIDIA Chips

Phoenix Technology News, Beijing Time February 23 — According to Bloomberg, NVIDIA has been a key driver of the stock market reaching new highs for years. However, as doubts about AI grow in the market, Wall Street is increasingly worried that regardless of this week’s earnings report, the stock price may face downward pressure.

NVIDIA’s stock has been trading sideways for months, with only a 1.7% increase since early Q4 last year, slightly behind the S&P 500’s 3.3% gain during the same period. This year, the stock has barely maintained growth, ranking in the lower half among S&P 500 components. For a company that recently led the index with triple-digit annual gains, such performance marks a clear slowdown.

“From a fundamental perspective, NVIDIA’s performance remains strong, but the question is whether market sentiment can also stay high,” said Matt Stucky, Chief Equity Portfolio Manager at Northwestern Mutual Wealth Management. “Anxiety around this AI rally continues to intensify across multiple sectors.”

Risk Overlay

NVIDIA’s recent poor performance is largely due to increased investor concerns over major companies investing hundreds of billions of dollars in AI R&D, prompting withdrawals from giant tech stocks. However, the stock market still faces many external risks that also impact NVIDIA’s stock performance.

Geopolitical tensions are high, with the Trump administration threatening to attack Iran. Data released last Friday showed U.S. economic growth slowing while inflation remains stubborn. The labor market appears to be stabilizing after softening in 2025, leading traders to adopt a cautious stance on further Fed rate cuts. Additionally, the Supreme Court recently rejected Trump’s tariffs, which is seen as favorable for U.S. companies, but as the White House considers how to handle this ruling and maintain Trump’s signature economic policies, it introduces another layer of uncertainty.

NVIDIA’s Stock Weak at Start of Year

All these factors make NVIDIA’s situation delicate ahead of its upcoming Q4 and full-year earnings report on Wednesday. Investors expect the results to significantly surpass Wall Street estimates and to raise guidance for the coming quarters. However, whatever NVIDIA does or says, it may be difficult to push the stock price higher. The stock has declined after its last two quarterly reports.

“This will be an important earnings release, but I think NVIDIA’s stock could fall because the results might not be strong enough. Based on what we know, earnings and forecasts should be okay, but may not meet market expectations,” said Rhys Williams, Chief Strategist at Wayve Capital Management.

Tech Giants Also Struggling

NVIDIA isn’t the only one facing this predicament. As the biggest contributors to the recent stock market rally, the “Big Seven Tech Giants” have also been stagnant for months. An index tracking these companies has fallen nearly 1% since early Q4, underperforming the S&P 500 during the same period.

Mixed earnings reports from large tech firms have heightened market caution toward AI, with Wall Street especially focused on their massive AI-related capital expenditures. For example, Microsoft posted strong overall results but its stock still declined, as investors focused on slowing growth in Azure cloud services and record-high spending expectations.

That said, NVIDIA’s stagnant stock has a silver lining: its market cap has fallen significantly. Currently, NVIDIA’s forward P/E ratio is below 24, near its lowest in five years, well below the roughly 38 average over the past five years. If investors are satisfied with the earnings report and hear encouraging words from CEO Jensen Huang, the relatively low stock price could serve as a catalyst for buying.

“NVIDIA has somewhat been a market savior. People hope it will deliver an excellent earnings report to calm the market,” said Will McMahon, Chief Equity Strategist at MFA Wealth.

However, even if the stock rises, given Wall Street’s overall skepticism toward AI and NVIDIA’s performance, the company’s P/E ratio is likely to remain stable.

If the earnings fail to ease investor nerves, it could lead to more volatility in AI-related stocks and the broader market.

“If NVIDIA sneezes, everyone catches a cold,” said Luke Rahbari, CEO of Equity Armor Investments. (Author: Xiao Yu)