Nvidia's Earnings Are the 'Next Important Test for AI Bulls' This Week

Nvidia Corp., a key player in the artificial intelligence boom, is preparing to release its fourth-quarter earnings on Wednesday. Although its stock has rebounded slightly from last month’s selloff during the DeepSeek-driven market turmoil, new concerns are emerging on Wall Street.

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One major focus will be Nvidia’s new Blackwell chip architecture. While production of the new chips has increased, there have been reports of supply shortages, delays, and overheating problems, causing some major customers to postpone their orders. These issues are raising doubts about Nvidia’s short-term financial outlook, particularly as the company and other tech giants face the possibility of slower growth despite significant investments in AI and heavy reliance on Nvidia’s chips.

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According to analysts at BofA, Nvidia’s earnings report will serve as the "next important test for AI bulls." In a recent note, they mentioned that while the company's earnings per share may lack excitement, there should be enough substance to reassure investors. Despite potential post-earnings volatility, they expect positive momentum to return as investors focus on Nvidia’s upcoming product lineup, including the GB300 and Rubin chips, and its expansion into new areas like robotics and quantum technologies.

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Market turbulence erupted last month when DeepSeek, a China-based AI platform, suggested that its technology could perform on par with leading AI models like ChatGPT while using significantly less money, energy, and processing power. This claim challenged the prevailing assumption that advanced AI requires massive financial and computational resources. The possibility of cheaper AI disrupted the market, raising questions about whether the current expensive infrastructure model is sustainable.

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Executives from other major tech firms, including Meta Platforms Inc. and Amazon.com Inc., responded by acknowledging the opportunity to learn from DeepSeek’s innovations. However, Amazon CEO Andy Jassy cautioned that while lower costs could improve efficiency, they are unlikely to reduce spending as companies continue to invest heavily in AI.

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Despite the uncertainty, Nvidia’s stock remains up more than 70% over the past 12 months, significantly outperforming the broader S&P 500, where strong growth outside the tech sector remains elusive. However, some experts remain skeptical of DeepSeek’s bold claims. Dan Morgan, a senior portfolio manager at Synovus, stated that while DeepSeek’s assertions are intriguing, it remains to be seen whether they will genuinely disrupt existing AI models and architectures.

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Beyond Nvidia, several other high-profile companies will report earnings this week. Media and entertainment powerhouse Paramount Global is set to release its results while facing potential challenges in its merger discussions with Skydance Media. Rival Warner Bros. Discovery Inc. will also announce its earnings.

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Consumer spending habits will come under scrutiny as inflation continues to impact dining choices. Pizza chains Domino’s Pizza Inc. and Papa John’s International Inc. will report their financials, along with fast-casual brand Cava Group Inc. Their results will provide insights into whether higher costs are discouraging customers from dining out.

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Salesforce Inc. will also release its earnings, with a particular focus on the company’s new AI “agents.” Additionally, other notable companies scheduled to report this week include Zoom Communications Inc., Chegg Inc., Planet Fitness Inc., Intuit Inc., Instacart, AMC Entertainment Holdings Inc., and Bath & Body Works Inc.

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One of the most anticipated earnings calls will be from Home Depot Inc., which reports its quarterly results on Tuesday. As a leading home-improvement retailer, Home Depot’s performance is often viewed as an indicator of home-buying demand. With mortgage rates remaining elevated and cooling the housing market, investors will closely monitor the company’s outlook.

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Another potential concern is the impact of tariffs imposed by former President Donald Trump. While Home Depot sources most of its products from North America, executives may address how they plan to diversify their supply chain in response to these trade policies. Home Depot’s report will come on the heels of Walmart Inc.’s recent forecast, which projected the company’s first quarterly profit decline in three years.

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Lowe’s Cos. Inc., one of Home Depot’s chief competitors, is also set to report earnings this week. Additionally, off-price retail giant TJX Cos. and fashion retailer Urban Outfitters Inc. will provide updates on how the consumer spending landscape is affecting their businesses.

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Despite recent volatility, the broader stock market remains resilient. Nvidia’s upcoming report will be a crucial test for investors focused on the AI sector. Analysts remain cautiously optimistic, anticipating that the company’s strong product roadmap will support future growth. However, concerns about supply chain issues and competition from emerging AI platforms like DeepSeek could weigh on sentiment.

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As the market digests these earnings reports, investors will be watching closely for any signs that the AI boom is losing momentum or whether Nvidia and other tech leaders can sustain their rapid growth. This week’s results from a diverse range of companies will provide a clearer picture of how different sectors are navigating the evolving economic landscape.

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