The results of the AI major exam will be announced tomorrow morning. Can NVIDIA's "invincible halo" be maintained?

The Zhitong Finance APP noted that NVIDIA (NVDA.US)'s performance will determine whether artificial intelligence can once again become the main driving force behind the rise of U.S. stocks, or trigger further weakness after the seven major tech stocks enter a correction phase.

The earnings report released by the leading AI chip company has become one of the most important events on Wall Street this year. NVIDIA will announce its fourth-quarter earnings after the market closes on Wednesday, which may be the company's most significant earnings report to date, following the rise of the Chinese startup DeepSeek that has disrupted the outlook for AI infrastructure demand.

Despite NVIDIA's stock price trending upward this month, it remains below levels prior to DeepSeek's emergence. Compared to previous sell-offs, investors are less willing to buy during this decline, and hedge funds have recently sold off tech stocks. This is also the first time since 2022 that NVIDIA's stock price has fallen ahead of its earnings announcement.

Shana Sissel, Chief Investment Officer of Banrion Capital Management, stated, "DeepSeek has made us realize that NVIDIA is not invincible." She expects the chip manufacturer's performance this quarter to be disappointing. Options data indicates an implied volatility of about 8.5% around the report.

"Other tech companies' earnings reports generally carry a pessimistic tone, and the AI business is, in some cases, the most pessimistic," she added. "I am very cautious and do not optimistically believe that this earnings report will be like those NVIDIA has released over the past year and a half. This could lead to a massive sell-off."

The emergence of DeepSeek in January this year disrupted one of Wall Street's most solid trades: that developing AI requires significant investment in computing power and related infrastructure, especially NVIDIA's chips. DeepSeek requires far fewer chips and computing power, yet its performance can rival that of the latest large models in the U.S.

Following TD Cowen's report that Microsoft has begun to cancel leases for a large amount of data center capacity in the U.S., tech stocks have experienced the latest volatility, a move that may reflect concerns about whether it is building AI computing capacity beyond long-term needs.

However, a key theme reported by large tech companies this earnings season—including NVIDIA's clients Microsoft, Amazon, Alphabet, and Meta—has been the confirmation or significant increase in capital expenditure plans, indicating that they are not yet ready to reduce demand for NVIDIA products.

Nick Rubinstein, a technology stock portfolio manager at Jennison Associates, stated, "This quarter, we have seen a significant increase in capital expenditure numbers, and what encourages me is that the companies providing most of the spending and AI infrastructure are historically the strongest companies, indicating that this trend is sustainable." Data shows that analysts' expectations for NVIDIA's net profit in 2026 have remained stable over the past quarter, while revenue expectations have risen by about 2%, indicating that Wall Street investment banks have not lowered their forecasts due to DeepSeek or other reasons. In a report released after the market closed on Wednesday, analysts expect NVIDIA's quarterly revenue to exceed $38 billion, a 73% increase compared to the same period last year.

The stability of the forecasts, combined with the stock price's decline since the last report, has weakened one of NVIDIA's biggest issues: valuation. The current stock price is 28 times expected earnings, below the 10-year average, and close to the Nasdaq 100 index's price-to-earnings ratio of about 26 times, with little difference.

"It is important to recognize that this is no longer an expensive stock," Rubinstein said. "Given a growth rate of over 20%, I think the price-to-earnings ratio is relatively reasonable."

Wall Street's ratings for NVIDIA are generally positive, with nearly 90% of analysts tracked by Bloomberg recommending a buy, while only one firm—Punto Research—has given a sell rating. The average target price from analysts indicates a potential increase of 38% for NVIDIA over the next 12 months, the highest implied return among the components of the Philadelphia Stock Exchange Semiconductor Index.

Matt Stucky from Northwest Mutual Wealth Management stated, "NVIDIA's stock price is indeed not difficult to rise." He is optimistic about the growth potential of the company's Blackwell chips and other factors. If investors' concerns "dissipate, you will start to see the stock price experience multiple expansions."