(Bloomberg) — For much of the year, chip stocks have been powering the market higher. Now, Nvidia Corp.\u2019s earnings have a chance to confirm that the rally has more room to run \u2014 or add another brick to investors\u2019 wall of worry.<\/p>\n
Most Read from Bloomberg<\/p>\n
The leader in artificial intelligence semiconductors reports its results after the market close on Wednesday. Wall Street is expecting the latest in a series of strong prints from chipmakers as Big Tech continues to shower the companies with cash to build out AI infrastructure. So investors will be looking for indications about what the growth outlook is from here.<\/p>\n
\u201cNvidia\u2019s results or guidance and the discussion on the call can give investors more confidence that this AI buildout will last not just a quarter, not just 2026, but into 2027 and 2028 and beyond,\u201d said JoAnne Feeney, a portfolio manager at Advisors Capital Management, which owns Nvidia shares. \u201cThat will be reassuring.\u201d<\/p>\n
A disappointment, however, could give credence to investors\u2019 fears that the group has gotten overextended. The Philadelphia Stock Exchange Semiconductor Index has soared more than 60% this year, but it tumbled 6.4% over Friday and Monday as inflation concerns weighed on the stocks. Nvidia shares are up slightly in early trading Wednesday, extending gains to 19% in 2026 and more than 34% since hitting a recent low in late March, but they lost 6.4% in three sessions through Tuesday\u2019s close. They\u2019re still outperforming the technology-heavy Nasdaq 100 Index, which has gained 15% this year.<\/p>\n
\u201cNvidia unfortunately created the expectation that it\u2019s going to beat and raise every quarter, if they don\u2019t, that\u2019s going to be disappointing,\u201d Feeney said.<\/p>\n
The stock was up 0.6% Wednesday morning. It has declined the day after Nvidia\u2019s last three earnings reports even though the company posted solid results. The options market is pricing in a 5.5% move in either direction in the wake of this report.<\/p>\n
Despite its relatively underwhelming performance in 2026, Nvidia remains the biggest stock in the market, accounting for almost a fifth of the S&P 500 Index\u2019s more than 7% advance this year. Four other chipmakers \u2014 Micron Technology Inc., Broadcom Inc., Advanced Micro Devices Inc. and Intel Corp. \u2014 are among the seven largest point contributors to the S&P 500\u2019s rise in 2026, a level of leadership rarely seen from this cyclical industry.<\/p>\n
Investors certainly have plenty of reasons for optimism in an economy soaked with AI cash. The four biggest spenders \u2014 Amazon.com Inc., Alphabet Inc., Microsoft Corp. and Meta Platforms Inc. \u2014 are planning as much as $725 billion in capital expenditures this year and significantly more in 2027.<\/p>\n
Chips are a huge part of that spending, and Nvidia retains a commanding share of the market for AI accelerators. The growth is coming so quickly that the stock has started to look cheap. Consensus estimates for Nvidia\u2019s net income in fiscal 2027 \u2014 which ends in January \u2014 have risen by 13% over the past three months, while the view for revenue has climbed 12%, according to data compiled by Bloomberg. As a result of those increased expectations, the shares now trade at less than 24 times estimated earnings, well below their 10-year average of roughly 36.<\/p>\n
\u201cThe valuation is secondary to the fundamental growth story, which remains the primary driver, but valuations aren\u2019t at a discomforting level,\u201d said Jeffrey Blazek, co-chief investment officer of multi-asset at Neuberger Berman Group, which has $567 billion in assets under management. Nvidia\u2019s valuation \u201cgives us comfort that we\u2019re not in a bubble relative to its earnings or cash flow.\u201d<\/p>\n
This earnings season has seen a number of blowout reports from chipmakers, with Intel, AMD, Texas Instruments Inc., NXP Semiconductors NV and Silicon Motion Technology Corp. all posting double-digit rallies in the wake of their results. So far this season, 93% of chipmakers have topped earnings expectations, with an upside surprise of nearly 25%, compared with a 6.6% upside surprise last quarter, according to data compiled by Bloomberg.<\/p>\n
But regardless of what Nvidia reports, it may be difficult for the stock to see a similar pop. First, it\u2019s just much bigger than those companies, meaning it takes far more enthusiasm to really move the needle. And second, it\u2019s facing growing competition from rivals like AMD, while major customers Alphabet and Amazon are finding traction with their own chips.<\/p>\n
This helps explain why Nvidia is no longer the top performing stock in the market. That title now belongs to companies that supply memory chips and storage, such as Sandisk Corp., Seagate Technology Holdings Plc and Micron Technology Inc.<\/p>\n
\u201cThe setup going into this, if you can believe it, it\u2019s less of a sexy or exciting story than some of the other more sexy and exciting stories that are out there,\u201d said Thomas Martin, senior portfolio manager at Globalt Investments. \u201cYet, it\u2019s a gigantic company.\u201d<\/p>\n
Nvidia\u2019s growth outlook, while still strong, is expected to decelerate in the coming years, which could further impede the stock\u2019s momentum. The company is expected to post revenue growth of about 72% in fiscal 2027 and 34% in 2028, with the pace continuing to slow from there.<\/p>\n
\u201cThe narrative is more about the duration of growth and less about the quarter,\u201d said Neville Javeri, a portfolio manager and head of the Empiric LT Equity team at Allspring Global Investments, which owns Nvidia shares. Javeri added that he will be paying close attention for any details about Blackwell chip sales and future demand for its new Rubin line.<\/p>\n
Of course, even a strong report doesn\u2019t guarantee that Nvidia shares will rally. But these results are far more about the long-term outlook for the company and chipmakers more broadly. Based on analysts\u2019 average price target, Wall Street sees the stock rising 25% over the next 12 months.<\/p>\n
\u201cIf Nvidia can provide evidence that their newest chips are seeing really good traction and that the addressable market is larger than people think because it\u2019s longer in duration, that will go a long way towards making investors comfortable in their broad ownership of the companies driving the AI buildout,\u201d Advisors Capital\u2019s Feeney said.<\/p>\n
Tech Chart of the Day<\/p>\n
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As SoftBank Group Corp. began investing billions of dollars in OpenAI last year, some executives asked Masayoshi Son what would happen in the event \u2014 however unlikely \u2014 that the ChatGPT developer should fail.<\/p>\n<\/li>\n
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Earnings Due Wednesday<\/p>\n
Earnings Premarket:<\/p>\n<\/li>\n
Earnings Postmarket:<\/p>\n
Nvidia Corp. (NVDA US)<\/p>\n<\/li>\n
Intuit Inc. (INTU US)<\/p>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n
–With assistance from Subrat Patnaik and David Watkins.<\/p>\n
(Updates stock moves throughout)<\/p>\n
Most Read from Bloomberg Businessweek<\/p>\n
\u00a92026 Bloomberg L.P.<\/p>\n","protected":false},"excerpt":{"rendered":"(Bloomberg) — For much of the year, chip stocks have been powering the market higher. Now, Nvidia Corp.\u2019s…\n","protected":false},"author":3,"featured_media":810040,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_share_on_mastodon":"0"},"categories":[6],"tags":[254360,738,3638,64,54689,329271,1671,90985,67,132,68],"class_list":["post-810039","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business","tag-advisors-capital-management","tag-artificial-intelligence","tag-bloomberg","tag-business","tag-earnings-reports","tag-joanne-feeney","tag-nvidia","tag-portfolio-manager","tag-united-states","tag-unitedstates","tag-us"],"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@us\/116607430693335996","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/810039","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/comments?post=810039"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/810039\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/810040"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=810039"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=810039"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=810039"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}