Nvidia's (NVDA) earnings will be a critical test for the AI trade following the stock’s sluggish start to the year. But even if the chip giant beats Wall Street’s lofty expectations, it doesn’t guarantee the stock will regain its lost momentum.
In fact, the road ahead is likely to be bumpy as concerns surrounding China’s AI startup DeepSeek, slowing growth, and export restrictions remain potential overhangs on the stock. And that’s prompting Wall Street to send a clear message: brace for a wild ride.
“We’re expecting significant volatility … we’ve seen that play out every time,” Raymond James chief market strategist Matt Orton told me.
The options market is predicting a 7% swing in Nvidia shares when the chip giant reports fourth quarter earnings. That’s a more muted reaction compared to recent quarters but it’s still a lot of money — equating to about a $230 billion swing in market value.
And what sets this quarter apart from others is that the volatility might linger for longer, pros warn. BayCrest equity derivatives managing director David Boole told me the stock could stay on a roller coaster for a month after earnings, as some investors have already bought the dip after the DeepSeek driven sell-off, while others who are spooked may not be satisfied with the results.
“We had the dress rehearsal about a month ago,” Boole said. “The sense is what can they say that's going to really drive Nvidia up another 20% in one day?"
Meanwhile, Nvidia’s once unrelenting momentum has decelerated. Shares are up only 0.9% since the start of the year after dropping 3.9% in the past month. It’s a dramatic slowdown from the company’s massive outperformance in 2024, when shares surged 171% and accounted for more than 22% of the S&P 500’s 2024 gains.
The chips giant is no longer the S&P 500’s top contributor. Meta now leads, accounting for 13% of the benchmark’s year-to-date gains, compared to 5% from Nvidia.
Despite near-term uncertainty, many analysts on Wall Street remain bullish on Nvidia’s long-term future, as noted by chof360 Finance's Brian Sozzi. Bank of America’s Vivek Arya warns of headwinds in the current quarter from Blackwell transition, Hopper declines, and China restrictions — only to be followed by strong long-term prospects.
"The stock could be volatile post results, but we expect positive momentum to resume as investors look forward to Nvidia's leading new product pipeline (GB300, Rubin) and total addressable market expansion into robotics and quantum technologies at upcoming GTC conference (March 17)," Arya wrote in a recent note to clients.
Story Continues
For investors looking for ways to play Nvidia's results, the print could unlock opportunities elsewhere in the AI trade. Raymond James’ Matt Orton recommends software and cybersecurity stocks, calling them top bets for AI’s “next phase.”
“You want to digest any volatility introduced from Nvidia and see where else you might be able to put your money… as this market remains choppy in the near term,” Orton added.
“We’ve seen a bifurcation between software and everything else with respect to the AI trade following the DeepSeek news. I continue to like the software trade, especially cybersecurity, given the increased number of hacks and continued investment we’re seeing at the corporate level.”
Nvidia is scheduled to report after the market closes on Wednesday, Feb. 26, with revenue expected to rise 73% year over year — a sharp slowdown from its 265% growth a year ago.
Seana Smith is an anchor at chof360 Finance. Follow Smith on X @SeanaNSmith. Tips on deals, mergers, activist situations, or anything else? Email [email protected].
Click here for the latest technology news that will impact the stock market
Read the latest financial and business news from chof360 Finance
