As earnings loom, Nvidia’s setup is the mirror image of last quarter’s face-ripping gains

Just three months have passed since Nvidia last reported earnings, but that might as well have been an alternate universe.

The chip designer ripped higher ahead of its earnings report in November, gaining 25% in the two months prior and far outperforming the VanEck Semiconductor ETF in the process.

This time, the stock is slouching into Wednesday’s release, having suffering a record one-day loss of market cap in January and lagging the semiconductor ETF since late December.

The fundamental backdrop hasn’t changed too much over the course of three months. But the vibes, as the kids say, have shifted. Notwithstanding megacap tech companies’ commitment to spend some $315 billion on capex this year to bolster their AI capabilities, investors are seemingly looking through the current year and wondering when this supercharged spending binge will materially inflect lower. The emergence of DeepSeek and worries that Microsoft may be fully stocked on data centers — a development which is not necessarily germane when it comes to the outlook for GPU demand — have caused some fraying of the everything-AI-to-the-moon thesis.

It’s tough to get much multiple expansion when Nvidia’s earnings and revenue growth rates have come off the boil, but by the same token, it’s tough to get too much multiple contraction when its top and bottom lines are still growing faster than most companies out there.

In the run-up to the November release, we warned of the risk that gains were being pulled forward, meaning that another solid earnings report was likely well embedded in the price. That’s pretty much what came to pass afterward, even as the chip designer delivered higher-than-expected revenues and profits with a better outlook for its fourth quarter than the Street had anticipated.

Is this setup just last quarter’s in reverse? Well, as someone who is on the record vociferously objecting to low-n analysis of this sort, it would be pretty silly to have too much confidence in that view. But the simple logic holds that if you were to report the same set of numbers after going down 10% or up 25%, the reaction would probably be better in the former case than the latter.

“The market is heavily skewed negative right now around tech sentiment with any whisper of worries/concern from DeepSeek to MSFT CapEx causing a brutal ripple impact across the tech ecosystem,” Wedbush analyst Dan Ives wrote. “We expect another robust performance and ‘clear beat and raise special’ from Nvidia that should calm the nerves of investors as Jensen lays out the massive demand drivers from Blackwell and AI Capex in the field fueling this 4th Industrial Revolution.”