Will NVIDIA's earnings report tomorrow burst the AI bubble or trigger a new round of increases?

Following the cost-cutting impact of DeepSeek on the AI sector and Microsoft's withdrawal of two data centers raising market concerns, the AI industry is about to face a critical moment with the "most important financial report in the universe."

NVIDIA will release its quarterly earnings report after the U.S. stock market closes this Wednesday. The chip giant's stock price has been consolidating since June, despite occasional fluctuations during this period.

The market is closely watching this earnings report, trying to find clues about the next direction of NVIDIA's stock price: will it continue to soar, or is it the beginning of a bubble burst?

Analysts have differing opinions, painting a complex and uncertain picture for investors.

Bears: Expectations Too High, Bubble May Burst

Jeff Sica, an analyst at Circle Squared Alternative, holds a cautious view on NVIDIA's earnings report. He warns that NVIDIA may "burst the AI bubble."

Sica points out:

Since 2018, he has been recommending NVIDIA stock, leading many investors to substantial profits. However, NVIDIA now faces the "curse of high expectations." The market's expectations for NVIDIA are too high, which means the company needs to significantly exceed expectations in earnings and revenue.

At the same time, NVIDIA is under pressure from China's DeepSeek technology, which is cheaper and more efficient, potentially prompting the company to reduce capital expenditures, thereby impacting NVIDIA's business.

Sica stated that NVIDIA's performance in the earnings call on Wednesday is considered a failure, leading to an overall decline in AI stocks. NVIDIA's stock price has been very weak, especially when companies like Microsoft report reduced data center spending, which must be taken seriously. He also revealed that he has sold some NVIDIA shares but will retain a portion.

Bulls: Strong Demand, Stock Price Expected to Rise

Jordan Klein, an analyst at Mizuho, has an optimistic view on NVIDIA's earnings report. He believes:

There is currently a large amount of off-market capital waiting for the right entry point, and any rise in stock price could trigger a flood of funds. The likelihood of NVIDIA's stock price rising is greater than falling after recent stagnation.

Klein points out that NVIDIA's management has hinted that demand for the new Blackwell series products far exceeds supply, and the company is ramping up production to meet the demand growth in the second half of the year. Despite some market concerns, such as whether DeepSeek will prove that future AI development will reduce reliance on hardware, and Microsoft's potential cancellation of some data center leases, which has increased market anxiety, Klein's optimism remains unaffected.

Ben Reitzes from Melius Research views NVIDIA's prospects from a more macro perspective. He believes that intensified AI competition benefits NVIDIA.

For AI chip companies, "massive validation of demand" has already begun. Tech giants are competing for leadership in the AI field, allowing NVIDIA to capitalize on this wave of spending. The outcome of this competition is in front of us, indicating that NVIDIA will achieve significant victories by 2025He compared NVIDIA's hardware to Ferrari and stated that companies like xAI led by Musk highly value NVIDIA's chips