It’s been a very strong quarter for big tech earnings, but that meant much for the share prices of the season’s earnings beaters. With Nvidia (NASDAQ:NVDA) poised to pull the curtain on its results, wrapping up what’s been a hot, but apparently not hot enough, season of earnings, investors might get enough info about the state of the AI trade to move forward.
And with the government shutdown coming to an end, we’ll also have more visibility into the economic numbers and the odds of a December Fed rate cut, which might be good or bad for markets, as investors take a while to digest the latest wave of data points against what are some still fairly high expectations in the face of increased cautious optimism (or outright pessimism) on the part of the smart money.
There’s no question that Nvidia’s latest numbers could be make or break, not just for the AI chip giant, but for the tech trade and perhaps the broad market. Indeed, a lot hinged on the numbers, not only meeting estimates but exceeding them.
Additionally, we’ll need to hear a bit more from Jensen Huang about the path forward and how the AI demand will go in the coming months and quarters. Though I’m sure the numbers from Nvidia will be decent, I’m not sure they’ll help the tech trade reverse course, with the Nasdaq 100 gravitating lower, now down just shy of 5% (that’s halfway to a correction) as of the end of Monday’s turbulent session of trade.
So, the big question remains: how should investors play shares of Nvidia going into earnings on Wednesday?
Could it be a wobbly session that sparks more downside on Thursday and Friday, ultimately propelling the Nasdaq 100 to that full 10% fall from peak to trough?
As always, it’s impossible to tell. Either way, I do find it concerning that some big-league investors have been dumping their stake in Nvidia as of the third quarter of 2025. Billionaire legend Peter Thiel’s fund actually dumped its entire stake in the GPU giant last quarter, while many other hedge funds also trimmed their stake.
With some of the bigger bears, like Dr. Michael Burry who was played by Christian Bale in the film The Big Short, placing bearish positions (in the form of put options) against Nvidia, I would be very hesitant to load up too significant a stake in the GPU juggernaut as it runs into earnings, even though I’m sure the actual Q3 results themselves are going to be fine.
It’ll probably take more than a big beat to move the needle higher
At the end of the day, investors have demanded more than “just fine” this earnings season, and pending a surprising upside revision (a low probability occurrence, in my opinion), I don’t think Nvidia stock will be able to so easily shrug off the negative momentum as tech and AI sentiment continues to shift downwards into the year’s end. While I wouldn’t bet against Nvidia stock as Burry has, I would hold off on buying until the quarterly numbers are revealed.
There are too many bearish forces in play, and the valuation (53.1 times trailing price-to-earnings) might be in need of a bit of a valuation reset or correction. Does a sell-off in the shares signal an AI bubble?
Not quite, at least in my view. A bearish drop in excess of 30% is par the course when it comes to Nvidia. It’s happened before, and it’ll probably happen again. That doesn’t mean the AI trade is going to implode in 2000-esque fashion, though.
In any case, if you’re overweight in Nvidia stock and haven’t done any selling through the year, I wouldn’t be afraid to lighten up.
However, for most investors who aren’t heavily invested in the name, perhaps holding off and waiting for more of a dip before adding to a position, I think, could make the most sense. It seems like Wall Street has turned against the stock in recent weeks, but once things get a bit excessive, it might be time to step in as a contrarian, even if you’re going against a legend in Dr. Burry.
The bottom line
In the meantime, I want to see the Nvidia numbers before considering the next move, because even a solid number might not cause a bullish reaction anymore. Also, I think Jensen Huang’s recent (and mildly concerning) commentary about China winning the “AI race” or China being just “nanoseconds behind” might give investors a bad taste in their mouths ahead of the big quarter.
In short, I wouldn’t buy Nvidia stock ahead of the Nvidia numbers. Rather, I’d lean more towards a hold. For those keen on buying, there might be a better price of admission by the end of this week.