Nvidia: Will Wednesday's Results Burst the AI Bubble?
As Nvidia reports its quarterly results this Wednesday, November 19, time seems to stand still on Wall Street. The semiconductor giant's stock has dropped more than 12% since its October peak, reflecting growing nervousness about the viability of the enormous investments made in AI. This earnings report is set to be a pivotal moment for the US markets, which are grappling with persistent doubts about the actual profitability of the tech sector.
Expected figures hide a slowing growth
Analysts are predicting third-quarter revenue between $54.92 and $55.2 billion, marking a 56% increase year-over-year. This appears impressive, but actually reveals a worrying slowdown: Nvidia once enjoyed triple-digit growth rates. The adjusted earnings per share are expected to reach $1.26, growing 55% annually. However, behind these figures lies a less appealing reality. The adjusted gross margin is forecast to decline by two points to 73.6%, the first tangible indicator of mounting pressure on cost structures. This margin erosion reflects the production challenges Nvidia faces; its chips aren't always produced at the pace demanded, forcing the company to develop more complex systems that integrate graphics processors, central processing units, and cooling solutions. Certainly, the order book shows $500 billion through 2026, which provides apparent assurance. But investors will be particularly focused on how diversified this demand is. The concentration among four hyperscalers—Microsoft, Amazon, Alphabet, and Meta—remains a potential risk. Expanding the customer base to include governments, AI-specialized clouds, or application sectors could reduce this systemic vulnerability.
The Shadow of a Bubble Looms Over Growth Prospects
The macroeconomic context has deteriorated in just a few days. The hope for interest rate cuts in the United States has cooled, while economic reports remain skewed by a recent government shutdown. The tech sector is experiencing one of its most challenging weeks in years. The S&P 500 has lost 2.5% since the beginning of November, while the Nasdaq index fell by 1.45% on the eve of the results. This pessimism has a structural dimension. Michael Burry, the emblematic figure from « The Big Short, » warns of a major risk: cloud and AI companies might be artificially inflating their profits by extending the depreciation periods of their equipment. His estimate? About $176 billion in profits could be overstated between 2026 and 2028 if companies spread expenses over five to six years while high-end chips retain economic usefulness for only two to three years. Nvidia itself does not depreciate, yet remains at the heart of this accelerated depreciation cycle. Its rapid launches—Blackwell today, Rubin tomorrow, Feynman on the horizon—render previous generations obsolete, questioning the legitimacy of the long depreciation periods applied within the ecosystem. If Nvidia accompanies its results with cautious outlooks, the term « AI bubble » will quickly break the silence in trading rooms.
Today's Verdict: Beyond the Accounting Numbers
Market options anticipate a 6% move following the release, highlighting the uncertainty among professional investors. Nvidia has frequently delivered positive surprises in recent quarters, causing temporary spikes followed by subsequent declines. This time, investors are looking for more than just headlines; they want concrete evidence that the euphoria is being transformed into sustainable value creation. Several signals are drawing attention. First, there's the focus on real examples of operational AI applications in health, finance, or industry. The actual deployment of systems based on Nvidia chips, beyond the testing phases, will be under intense scrutiny. Next, clarity from CEO Jensen Huang on who is actually financing these massive investments is critical. OpenAI mentions $1.4 trillion in investments in data centers over eight years, with Nvidia planning to inject up to $100 billion to build at least 10 gigawatts of AI capacity. However, the economic logic of these arrangements remains unclear to the markets. Lastly, the reaction itself will be telling. Low volatility despite strong results would indicate that investors have already priced in most of the scenario. Portfolio positioning would then reveal a fragmented market consensus, a classic sign of fragility. This conference call is more like a referendum on the validity of a multi-trillion-dollar wave of AI investments than just a simple quarterly earnings call.
This content has been automatically translated using artificial intelligence. While we strive for accuracy, some nuances may differ from the original French version.
