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Nvidia (NVDA) is scheduled to release its Q3 earnings after the market close today. It’s the most anticipated earnings announcement this year.
As the lead character in the AI-led mega-rally, NVDA’s exponential growth has captured the market’s attention. And it has pulled other tech stocks along for the ride.
It also saw NVDA become the largest stock, with its market cap briefly reaching $5 trillion. Along with other Magnificent 7 stocks, it helped propel the major indexes to all-time highs.
But now NVDA’s valuations are coming under intense scrutiny. And that has major ramifications for the markets.
Today’s results will set the tone for how markets perform for the remainder of 2025. And they will provide an indicator of how markets will kick off the new year…
NVDA’s huge earnings growth has been a major catalyst for its stock price surge. But it also comes with high expectations.
Everything is fine if NVDA keeps pumping out double-digit growth. But any lesser return leaves the stock vulnerable to disappointment.
Even just matching (rather than beating) earnings estimates could lead to a sharp sell-off.
Already, we’ve seen folks heading for the exit. And we’re not just talking about mom-and-pop investors…
Over the past week, SoftBank, a high-profile supporter and investor of NVDA, has reportedly sold its entire $5.8 billion stake. So has Peter Thiel’s fund, of which NVDA was a core holding (around 40%).
NVDA is now down 12% from its October all-time highs – a move that has taken more than half a trillion out of its valuation.
And other major stocks that have ridden on the AI theme – like Palantir and Meta Platforms, for example – are also feeling the pressure.
The once unstoppable rally is now facing some real headwinds as market sentiment turns…
This past week, we’ve seen a rotation out of growth into value stocks, including health care. When institutional money is transitioning to a defensive strategy, it often portends trouble ahead.
Plus, other factors are buffeting the economy and markets…
We’ve seen a huge drop in expectations for an interest rate cut next month. What was practically a sure thing just a few weeks ago is now less than a 50/50 chance.
Then there’s growing uncertainty around the cost of living and falling consumer confidence. That’s led to a wind back in tariffs – a key component of President Trump’s plans to reshape the economy.
And we don’t yet know if the trade truce with China will last… or what happens come January if the government once again grinds to a standstill.
All these factors put further weight on a rally that’s now into its third year. Any sell-off from NVDA’s earnings will only add to investors’ uncertainty.
To be clear, I’m not predicting some cataclysmic event. But I am advising everyone to remain careful.
Volatility is back up… and more risk-off events lie ahead…
Happy Trading,
Larry Benedict
Editor, Trading With Larry Benedict
Reading Trading With Larry Benedict will allow you to take a look into the mind of one of the market’s greatest traders. You’ll be able to recognize and take advantage of trends in the market in no time.
