{"id":20130,"date":"2025-08-24T11:44:08","date_gmt":"2025-08-24T11:44:08","guid":{"rendered":"https:\/\/www.europesays.com\/ie\/20130\/"},"modified":"2025-08-24T11:44:08","modified_gmt":"2025-08-24T11:44:08","slug":"nvidia-wont-be-able-to-live-up-to-wall-streets-sky-high-expectations-on-aug-27","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/ie\/20130\/","title":{"rendered":"Nvidia Won&#8217;t Be Able to Live Up to Wall Street&#8217;s Sky-High Expectations on Aug. 27"},"content":{"rendered":"\n<ul class=\"yf-1woyvo2\">\n<li class=\"yf-1woyvo2\">\n<p class=\"yf-1090901\">Nvidia is on the leading edge of artificial intelligence (AI) euphoria on Wall Street &#8212; and it&#8217;s slated to report its quarterly operating results in the coming days.<\/p>\n<\/li>\n<li class=\"yf-1woyvo2\">\n<p class=\"yf-1090901\">Gross margin for the stock market&#8217;s largest company is expected to come into focus, but perhaps for the wrong reasons.<\/p>\n<\/li>\n<li class=\"yf-1woyvo2\">\n<p class=\"yf-1090901\">Additionally, Nvidia may struggle to justify a valuation that, by historical standards, can be considered excessive.<\/p>\n<\/li>\n<li class=\"yf-1woyvo2\">\n<p class=\"yf-1090901\"><a class=\"link \" href=\"https:\/\/api.fool.com\/infotron\/infotrack\/click?apikey=35527423-a535-4519-a07f-20014582e03e&amp;impression=f99526b2-a40d-4d9c-b9e8-1179d3af6ebf&amp;url=https%3A%2F%2Fwww.fool.com%2Fmms%2Fmark%2Fe-sa-nonbbn-kp%3Faid%3D8867%26source%3Disaedikp0000053%26ftm_cam%3Dsa-bbn-evergreen%26ftm_veh%3Dkeypoints_pitch_feed_yahoo%26ftm_pit%3D17670\" rel=\"nofollow noopener\" target=\"_blank\" data-ylk=\"slk:10 stocks we like better than Nvidia \u203a;elm:context_link;itc:0;sec:content-canvas\">10 stocks we like better than Nvidia \u203a<\/a><\/p>\n<\/li>\n<\/ul>\n<p class=\"yf-1090901\">Arguably the most important data release of the entire third quarter is just days away. Following the closing bell on Wednesday, Aug. 27, Wall Street&#8217;s largest publicly traded company, and the innovative leader fueling the evolution of <a href=\"https:\/\/www.fool.com\/investing\/stock-market\/market-sectors\/information-technology\/ai-stocks\/?utm_source=yahoo-host-full&amp;utm_medium=feed&amp;utm_campaign=article&amp;referring_guid=74f1c510-629d-4b65-8934-019be9f75fdf\" rel=\"nofollow noopener\" target=\"_blank\" data-ylk=\"slk:artificial intelligence (AI);elm:context_link;itc:0;sec:content-canvas\" class=\"link \">artificial intelligence (AI)<\/a>, <strong>Nvidia<\/strong> (NASDAQ: NVDA), will report its fiscal second-quarter operating results (its fiscal year ends in late January).<\/p>\n<p class=\"yf-1090901\">No technological advancement has been hotter on Wall Street than AI. Empowering software and systems with AI so they can make split-second decisions and grow more efficient over time without human intervention is a game changer that can accelerate growth in most industries around the globe. In Sizing the Prize, analysts at PwC pegged the economic impact of AI at $15.7 trillion come 2030.<\/p>\n<p class=\"yf-1090901\">While an approximately 1,100% increase in Nvidia&#8217;s stock since the start of 2023 signals that the company is firing on all cylinders, a case can be made that the face of the AI revolution is priced for perfection in a market and trend that are anything but perfect. Despite its near-parabolic ascent, Nvidia will likely <a href=\"https:\/\/www.fool.com\/investing\/2025\/07\/25\/5-reasons-the-party-can-end-for-nvidia-on-aug-27\/?utm_source=yahoo-host-full&amp;utm_medium=feed&amp;utm_campaign=article&amp;referring_guid=74f1c510-629d-4b65-8934-019be9f75fdf\" rel=\"nofollow noopener\" target=\"_blank\" data-ylk=\"slk:struggle to live up to Wall Street&#039;s sky-high expectations on Aug. 27;elm:context_link;itc:0;sec:content-canvas\" class=\"link \">struggle to live up to Wall Street&#8217;s sky-high expectations on Aug. 27<\/a>.<\/p>\n<p>     <img fetchpriority=\"high\" decoding=\"async\" src=\"data:image\/gif;base64,R0lGODlhAQABAIAAAAAAAP\/\/\/ywAAAAAAQABAAACAUwAOw==\" alt=\"Nvidia's corporate logo in front of the company's Voyager headquarters.\" loading=\"eager\" height=\"640\" width=\"960\" class=\"yf-1gfnohs loader\"\/> Image source: Nvidia.           <\/p>\n<p class=\"yf-1090901\">In terms of AI-graphics processing units (GPUs), Nvidia has been the kingpin. Its Hopper (H100) and Blackwell GPUs have been deployed more than any other chips in high-compute data centers, with the respective compute capabilities of Nvidia&#8217;s hardware standing tall when compared to the competition.<\/p>\n<p class=\"yf-1090901\">But what&#8217;s been even more important than Nvidia&#8217;s competitive advantages is persistent AI-GPU scarcity.<\/p>\n<p class=\"yf-1090901\">The law of supply and demand states that when demand for a good or service outpaces its supply, the price of said good or service will climb until demand tapers. With an impressive backlog for its AI-GPUs, Nvidia has been able to command a premium price for its hardware, which in turn sent its generally accepted accounting principles (GAAP) gross margin to a high of 78.4% during the first quarter of fiscal 2025. As long as this AI-advanced chip scarcity persists, Nvidia&#8217;s gross margin is golden.<\/p>\n<p class=\"yf-1090901\">The problem for Nvidia is that it&#8217;s no longer the only rodeo in town. <strong>Advanced Micro Devices<\/strong> and China-based Huawei are external competitors that are actively ramping up production of their data-center chips. However, the biggest threat to Nvidia&#8217;s GAAP gross margin potentially comes from within.<\/p>\n<p>  <a href=\"https:\/\/ycharts.com\/companies\/NVDA\/chart\/\" target=\"_blank\" rel=\"noopener noreferrer nofollow\"><img decoding=\"async\" src=\"data:image\/gif;base64,R0lGODlhAQABAIAAAAAAAP\/\/\/ywAAAAAAQABAAACAUwAOw==\" alt=\"NVDA Gross Profit Margin (Quarterly) Chart\" loading=\"lazy\" height=\"441\" width=\"720\" class=\"yf-1gfnohs loader\"\/><\/a> <a href=\"https:\/\/ycharts.com\/companies\/NVDA\/gross_profit_margin\" rel=\"nofollow noopener\" target=\"_blank\" data-ylk=\"slk:NVDA Gross Profit Margin (Quarterly);elm:context_link;itc:0;sec:content-canvas\" class=\"link \">NVDA Gross Profit Margin (Quarterly)<\/a> data by <a href=\"https:\/\/ycharts.com\" rel=\"nofollow noopener\" target=\"_blank\" data-ylk=\"slk:YCharts;elm:context_link;itc:0;sec:content-canvas\" class=\"link \">YCharts<\/a>.    <\/p>\n<p class=\"yf-1090901\">Nvidia&#8217;s top customers, in terms of net sales, have consistently been members of the &#8220;Magnificent Seven.&#8221; Most of these leading clients are internally developing AI GPUs and solutions to use in their respective data centers. Even though these chips are no threat to Nvidia&#8217;s compute advantages, they are considerably cheaper and not backlogged like Blackwell. In my view, it&#8217;s inevitable that internal chip development will cost Nvidia precious data center real estate.<\/p>\n<p class=\"yf-1090901\">More importantly, this internal development is working against the AI-GPU scarcity that Nvidia has held so dear. As the insatiable demand for AI-accelerating chips calms, Nvidia should see its pricing power and GAAP gross margin fade over time. We&#8217;ve already been witnessing steady gross margin erosion for more than a year.<\/p>\n<p class=\"yf-1090901\">In addition to gross margin being front and center, Nvidia is going to have a near-impossible task of justifying its valuation premium amid a historically pricey market.<\/p>\n<p class=\"yf-1090901\">To be abundantly clear, I believe Nvidia is deserving of a valuation premium thanks to its competitive advantages. The issue, while subjective, is how far this premium can be stretched before it becomes excessive.<\/p>\n<p class=\"yf-1090901\">Historical precedent tells us that industry leaders of next-big-thing trends have a relatively short leash when it comes to extended valuations. Prior to the bursting of the dot-com bubble a quarter-century ago, prominent internet leaders like <strong>Cisco Systems<\/strong>, <strong>Microsoft<\/strong>, and <strong>Amazon<\/strong> peaked at price-to-sales (P\/S) ratios ranging from 31 to 43, respectively. Except for <strong>Palantir Technologies<\/strong>, whose P\/S ratio recently entered a separate orbit, no megacap company on the leading edge of a game-changing technology has been able to maintain a P\/S ratio in the 30 to 40 range for a substantial length of time.<\/p>\n<p class=\"yf-1090901\">Less than a week ago, Nvidia&#8217;s trailing-12-month P\/S ratio was hovering north of 30. While its P\/S ratio will decline a bit when it reports projected year-over-year sales growth of 53% in the fiscal second quarter, it&#8217;ll still be tipping the scales at a multiple that&#8217;s far above anything that&#8217;s been historically sustainable.<\/p>\n<p class=\"yf-1090901\">On top of being individually pricey, Nvidia is one of a handful of high-growth tech stocks that have lifted the <strong>S&amp;P 500<\/strong>&#8216;s (SNPINDEX: ^GSPC) Shiller price-to-earnings (P\/E) ratio to its third-highest multiple during a continuous bull market when back-tested 154 years. Previously documented occasions when the stock market was this expensive were eventually followed by declines of 20% or more in the benchmark S&amp;P 500.<\/p>\n<p class=\"yf-1090901\">Pardon the pun following the gross margin discussion above, but there&#8217;s simply no margin for error.<\/p>\n<p>  <img decoding=\"async\" src=\"data:image\/gif;base64,R0lGODlhAQABAIAAAAAAAP\/\/\/ywAAAAAAQABAAACAUwAOw==\" alt=\"A visibly worried person looking at a rapidly rising then plunging stock chart displayed on a tablet.\" loading=\"lazy\" height=\"637\" width=\"960\" class=\"yf-1gfnohs loader\"\/> Image source: Getty Images.     <\/p>\n<p class=\"yf-1090901\">The final piece of the puzzle that helps explain why Nvidia is positioned to disappoint come Aug. 27 (and beyond) has to do with history.<\/p>\n<p class=\"yf-1090901\">For the better part of the last three decades, investors have been privy to no shortage of next-big-thing trends and game-changing innovations. While many of these trends went on to positively impact corporate America, including the advent of the internet, all endured early-stage bubble-bursting events.<\/p>\n<p class=\"yf-1090901\">The problem with hyped innovations is that investors consistently overshoot when it comes to widespread adoption timelines and early-stage utility. For example, businesses didn&#8217;t fully understand how to make the internet revolution work in their favor until many years after it went mainstream. It takes time for game-changing innovations to mature, which makes it unlikely that artificial intelligence has done so in a little over two years.<\/p>\n<p class=\"yf-1090901\">While demand for AI-data center infrastructure and AI software has been impressive, most businesses aren&#8217;t yet optimizing their AI solutions, nor are many generating a positive return on their AI investments. These are telltale signs that investors have, yet again, overestimated how impactful artificial intelligence will be, at least in the early going.<\/p>\n<p class=\"yf-1090901\">No megacap company&#8217;s growth has been more reliant on investor euphoria surrounding the evolution of AI than Nvidia, which has added close to $4 trillion in market cap in less than three years. Even the slightest hiccup can disrupt this hype.<\/p>\n<p class=\"yf-1090901\">To reiterate, Nvidia is a solid and time-tested company that isn&#8217;t going anywhere. But it&#8217;s far from perfect &#8212; and perfection is all Wall Street will settle for at this point.<\/p>\n<p class=\"yf-1090901\">Before you buy stock in Nvidia, consider this:<\/p>\n<p class=\"yf-1090901\">The Motley Fool Stock Advisor analyst team just identified what they believe are the\u00a0<strong><a href=\"https:\/\/api.fool.com\/infotron\/infotrack\/click?apikey=35527423-a535-4519-a07f-20014582e03e&amp;impression=cdfe0e00-396e-482f-adf5-56ff41798dbe&amp;url=https%3A%2F%2Fwww.fool.com%2Fmms%2Fmark%2Fe-sa-bbn-bn%3Faid%3D8867%26source%3Disaeditxt0001138%26ftm_cam%3Dsa-bbn-evergreen%26ftm_veh%3Darticle_pitch_feed_yahoo%26ftm_pit%3D18006&amp;utm_source=yahoo-host-full&amp;utm_medium=feed&amp;utm_campaign=article&amp;referring_guid=74f1c510-629d-4b65-8934-019be9f75fdf\" rel=\"nofollow noopener\" target=\"_blank\" data-ylk=\"slk:10 best stocks;elm:context_link;itc:0;sec:content-canvas\" class=\"link \">10 best stocks<\/a><\/strong> for investors to buy now\u2026 and Nvidia wasn\u2019t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.<\/p>\n<p class=\"yf-1090901\">Consider when <strong>Netflix<\/strong> made this list on December 17, 2004&#8230; if you invested $1,000 at the time of our recommendation,\u00a0<strong>you\u2019d have $649,657<\/strong>!* Or when <strong>Nvidia<\/strong> made this list on April 15, 2005&#8230; if you invested $1,000 at the time of our recommendation, <strong>you\u2019d have $1,090,993<\/strong>!*<\/p>\n<p class=\"yf-1090901\">Now, it\u2019s worth noting\u00a0Stock Advisor\u2019s total average return is 1,057% \u2014 a market-crushing outperformance compared to 185% for the S&amp;P 500. Don\u2019t miss out on the latest top 10 list, available when you join Stock Advisor.<\/p>\n<p class=\"yf-1090901\"><a class=\"link \" href=\"https:\/\/api.fool.com\/infotron\/infotrack\/click?apikey=35527423-a535-4519-a07f-20014582e03e&amp;impression=cdfe0e00-396e-482f-adf5-56ff41798dbe&amp;url=https%3A%2F%2Fwww.fool.com%2Fmms%2Fmark%2Fe-sa-bbn-bn%3Faid%3D8867%26source%3Disaeditxt0001138%26ftm_cam%3Dsa-bbn-evergreen%26ftm_pit%3D18006%26ftm_veh%3Darticle_pitch_feed_yahoo%26company%3DNvidia&amp;utm_source=yahoo-host-full&amp;utm_medium=feed&amp;utm_campaign=article&amp;referring_guid=74f1c510-629d-4b65-8934-019be9f75fdf\" rel=\"nofollow noopener\" target=\"_blank\" data-ylk=\"slk:See the 10 stocks \u00bb;elm:context_link;itc:0;sec:content-canvas\"><strong>See the 10 stocks \u00bb<\/strong><\/a><\/p>\n<p class=\"yf-1090901\">*Stock Advisor returns as of August 18, 2025<\/p>\n<p class=\"yf-1090901\"><a href=\"https:\/\/www.fool.com\/author\/1813\/\" rel=\"nofollow noopener\" target=\"_blank\" data-ylk=\"slk:Sean Williams;elm:context_link;itc:0;sec:content-canvas\" class=\"link \">Sean Williams<\/a> has positions in Amazon. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon, Cisco Systems, Microsoft, Nvidia, and Palantir Technologies. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a <a href=\"https:\/\/www.fool.com\/legal\/fool-disclosure-policy\/\" rel=\"nofollow noopener\" target=\"_blank\" data-ylk=\"slk:disclosure policy;elm:context_link;itc:0;sec:content-canvas\" class=\"link \">disclosure policy<\/a>.<\/p>\n<p class=\"yf-1090901\"><a href=\"https:\/\/www.fool.com\/investing\/2025\/08\/24\/prediction-nvidia-wont-live-up-wall-st-hype-aug-27\/\" rel=\"nofollow noopener\" target=\"_blank\" data-ylk=\"slk:Prediction: Nvidia Won&#039;t Be Able to Live Up to Wall Street&#039;s Sky-High Expectations on Aug. 27;elm:context_link;itc:0;sec:content-canvas\" class=\"link \">Prediction: Nvidia Won&#8217;t Be Able to Live Up to Wall Street&#8217;s Sky-High Expectations on Aug. 27<\/a> was originally published by The Motley Fool<\/p>\n","protected":false},"excerpt":{"rendered":"Nvidia is on the leading edge of artificial intelligence (AI) euphoria on Wall Street &#8212; and it&#8217;s slated&hellip;\n","protected":false},"author":2,"featured_media":20131,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[261],"tags":[291,289,290,986,18,17503,19,17,292,82,211],"class_list":{"0":"post-20130","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-artificial-intelligence","8":"tag-ai","9":"tag-artificial-intelligence","10":"tag-artificialintelligence","11":"tag-data-centers","12":"tag-eire","13":"tag-gross-margin","14":"tag-ie","15":"tag-ireland","16":"tag-nvidia","17":"tag-technology","18":"tag-wall-street"},"share_on_mastodon":{"url":"","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/20130","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/comments?post=20130"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/20130\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media\/20131"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media?parent=20130"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/categories?post=20130"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/tags?post=20130"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}