Can Nvidia still carry the market amid sky-high AI expectations?

Introduction

This Wednesday at 10 PM, Nvidia will report its earnings for Q1 FY2027. And honestly, it’s hard to overstate just how important this event is for the broader financial markets.

For several weeks now, the macro environment has continued to deteriorate: rising tensions in the Middle East with the conflict involving Iran, persistent inflation, elevated interest rates, and growing fears of an economic slowdown. Despite this backdrop, the Nasdaq and the S&P 500 have continued to hold up thanks to a single engine: growth expectations tied to the AI sector.

At the center of this dynamic is, of course, Nvidia. The company has become far more than just a GPU manufacturer. Today, Nvidia is effectively the main proxy for the global AI investment cycle. Its earnings provide a direct read on hyperscaler demand, the overall health of the AI sector, and more broadly, on the market’s ability to continue justifying current valuations.

The timing is especially important. The market is currently pricing in an almost perfect scenario: continued explosion in AI spending, Nvidia maintaining its historic margins, and demand continuing to accelerate. In this context, tonight’s earnings will likely determine not only the direction of NVDA stock, but potentially the direction of the broader market over the coming weeks.

This is already visible in recent market moves. The Philadelphia Semiconductor Index (SOX) has surged nearly 50% in just six weeks and now sits roughly 68% above its 200-day moving average, an even more extreme level than what was seen at the peak of the dot-com bubble in 2000. In other words, the market is extremely stretched around the AI narrative.

In this report, we’ll break down the key stakes behind Nvidia’s earnings, the metrics the market will be watching tonight, the potential post-earnings scenarios, and finally our own view on the situation along with our positioning.

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Nvidia Has Become the Pillar of the Market

To understand why this earnings release matters so much, it’s first necessary to realize just how central Nvidia has become to U.S. financial markets and to the global AI narrative. A few numbers help illustrate NVDA’s weight and influence within major equity indices.

• Nvidia now has a market capitalization of $5.4 trillion, with a P/E ratio of 46 (compared to around 34 for the Nasdaq 100).
• Nvidia represents roughly 9% of the Nasdaq 100 and 8% of the S&P 500.
• NVDA stock is up 18% since the start of 2026 (versus 15% for the Nasdaq 100 and 8% for the S&P 500).

Beyond the numbers, it’s important to understand that Big Tech has now entered a full-scale AI arms race, with companies spending record amounts to build computing capacity. For now, Nvidia remains the primary “picks and shovels” supplier of this revolution.

U.S. hyperscalers are now expected to spend around $725 billion in CAPEX in 2026, up roughly 77% year-over-year. Amazon alone could spend close to $200 billion, Microsoft around $190 billion, and Meta between $125 billion and $145 billion. A massive portion of these investments directly relates to AI infrastructure: GPUs, networking, data centers, and computing power.

The key point is that Nvidia currently captures the vast majority of this demand. The company still controls around 70% market share in AI chips thanks to its technological lead and, most importantly, its CUDA software ecosystem, which remains extremely difficult to replace despite efforts from Google, Amazon, and Broadcom with their own custom chips.

In other words, when Nvidia reports earnings, the market is not simply looking at the health of one company. Investors see it as a critical source of information on whether the AI investment cycle is still accelerating or whether the first signs of limits are beginning to emerge.

As a result, Nvidia now finds itself in a position where the company not only has to continue delivering exceptional growth, but also prove that this growth can keep accelerating enough to justify current market valuations.

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What the Market Will Be Watching Tonight

Based on our analysis, there are five major elements markets will be watching when Nvidia reports its quarterly earnings tonight.

• Revenue and earnings per share.

This is the main metric, and Nvidia is no exception. Consensus currently expects between $78.5 billion and $79.2 billion in revenue for the quarter, representing roughly 75-80% year-over-year growth. EPS is expected around $1.75 to $1.78, compared with $0.96 a year earlier.

The key point is that simply beating consensus will probably not be enough. Nvidia has exceeded Wall Street expectations in 21 of the last 23 quarters, and the market now sees this as “normal.” The real issue will therefore be the size of the beat, and above all, the company’s ability to maintain a convincing acceleration trajectory.

• Data center revenue and hyperscaler demand.

The second closely watched element will be data center revenue, which has now become the absolute core of Nvidia’s business. Analysts expect around $72 billion to $73 billion from this division alone, representing the vast majority of the group’s revenue.

This number will provide a crucial read on real hyperscaler demand and the pace at which AI infrastructure continues to be deployed. In simple terms, the market wants to know whether Microsoft, Amazon, Google, and Meta are really continuing to increase AI spending at the current pace.

This is also where the market will look for signals about the evolution of the AI cycle. If growth slows or shows signs of fatigue, it will immediately fuel the narrative that hyperscalers are starting to optimize spending or shift toward custom chips developed in-house.

• Margins and Nvidia’s pricing power.

Margins will also be a key focus. Nvidia currently benefits from pricing power that is almost unprecedented in the industry, with gross margins close to 75%, an extremely high level even for a dominant technology company.

The market will therefore want to know whether Nvidia can maintain its ability to impose pricing despite rising competition. If margins remain stable or expand further, it would indicate that demand is still far above supply and that Nvidia retains an ultra-dominant position in the AI value chain.

The opposite, of course, could be interpreted as an early sign of slowing demand or growing traction for alternatives from Broadcom, AMD, Google, or Amazon.

• Hyperscaler CAPEX and comments on AI demand.

Beyond the headline numbers, investors will closely watch Jensen Huang’s comments on hyperscaler spending and the broader AI market dynamic.

The important point is that the market no longer looks at Nvidia as an isolated company. Today, Nvidia has become something of a “thermometer” for the global AI investment cycle. Every comment about Microsoft, Meta, Amazon, or Google will therefore be dissected.

Markets will especially look for clues on whether orders remain as strong as before, whether customers are accelerating data center deployments, and above all, whether Nvidia still believes demand remains far above available production capacity.

• Q2 guidance and future projections.

In our view, however, the real focus of the evening will probably be Q2 guidance. Consensus currently expects around $87 billion in revenue for the next quarter, and this figure will likely matter far more for the market reaction than the results of the quarter that just ended.

The reason is simple: the market is no longer really pricing the present. It is pricing the continuation of the AI cycle over several years. If Nvidia guides meaningfully above expectations, it would validate the idea that demand continues to accelerate despite the already massive sums invested by hyperscalers.

Conversely, guidance that is merely “in line” could be enough to trigger a negative market reaction. As mentioned above, the real risk tonight is not a bad quarter, but rather an excellent quarter, as expected, that simply fails to be excellent enough for a market already pricing near-perfection.

Finally, Jensen Huang’s comments will be scrutinized extremely closely. Markets will look for indications on the transition from Blackwell to Vera Rubin, the evolution of Chinese demand in a complex geopolitical environment, and competition from custom chips developed internally by Amazon, Google, and Broadcom.

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The Statistics Showing Why These Earnings Are Dangerous

Historically, Nvidia earnings have always generated significant volatility. Options markets are currently pricing a potential move, either up or down, of around 6% to 6.5% after the release, which represents nearly $350 billion in market cap movement in a single session.

What is most interesting is that Nvidia’s post-earnings reactions are often counterintuitive. Even though the company regularly beats expectations, the stock only closes positive the day after earnings around 55% of the time. The median post-earnings gain is also relatively small, around 0.3%.

This can be explained by the fact that Nvidia has become a crowded trade. A huge share of the market is already positioned bullishly, and implicit expectations are now enormous. In this context, very strong results can sometimes trigger selling simply because investors believe it is becoming increasingly difficult to do even better.

The comparison with the dot-com bubble is also starting to return regularly in analyst commentary. Seaport Research recently said that “the market is partying like it’s 1999,” particularly because of the explosion in the semiconductor sector.

After its 50% rally in just six weeks, the SOX now trades roughly 68% above its 200-day moving average. For context, at the peak of the dot-com bubble in 2000, the Nasdaq was “only” around 55% above its 200-day moving average. This does not necessarily mean we are in a bubble, but it does show how elevated the current level of optimism has become.

The problem is that when expectations become this high, the margin for error shrinks dramatically. The market is no longer simply looking for growth, but for growth strong enough to continue justifying the surge in AI-related valuations and investment.

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The Different Scenarios After the Release

The most bullish scenario would obviously be a massive beat combined with Q2 guidance far above expectations, ideally above $90 billion. If Nvidia confirms that hyperscaler demand continues to accelerate, that margins remain extremely high, and that the Blackwell rollout is progressing without major issues, it could be enough to extend the current momentum in semiconductors and the Nasdaq.

In this scenario, the market would conclude that the AI investment cycle is still far from peaking, despite the already enormous spending commitments from Big Tech. It would also reinforce the idea that Nvidia retains a dominant position that is difficult to challenge in the short term, even with the rise of internally developed chips from Google, Amazon, or Broadcom.

The intermediate scenario is probably the trickiest one for the market. Nvidia could report excellent results, beat consensus, and show impressive growth, while delivering guidance that is merely “in line” with current expectations. In a context where investors are already pricing an almost perfect scenario, this could trigger a classic “sell the news” move across the AI sector.

It is important to understand that the market is no longer just looking for a strong quarter. It is looking for proof that the AI cycle continues to accelerate despite already historic spending levels. This is what makes these earnings so dangerous: Nvidia needs to keep surprising positively, even though expectations have become extreme.

Finally, the bearish scenario would involve disappointing guidance, slowing data center revenue growth, margin contraction, or cautious comments on Blackwell, Vera Rubin, or Chinese demand. Today, the market does not want to see any friction in the AI machine.

In this context, even a slight disappointment could have a disproportionate impact on markets. The risk is not only a decline in Nvidia, but a broader reassessment of the sustainability of the AI CAPEX cycle currently priced by financial markets.

The macro backdrop makes this risk even more important. Between the conflict in Iran, energy tensions, inflation fears, and still-elevated rates, equity markets currently rely heavily on AI’s ability to keep justifying current valuations. Nvidia has therefore become, in a sense, the main psychological pillar of the market.

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Our Final View and Positioning in the Alpha Feed

In the rest of this Premium-only analysis, we detail our final market view ahead of Nvidia’s earnings and why we believe this event could define market direction over the coming weeks.

We also go into detail on our main scenario, the levels we are watching on Nvidia, the SOX, and the S&P 500, the potential implications for crypto and equity markets, and our risk management strategy in this extreme volatility environment.

Finally, we will present the position we decided to take ahead of Nvidia’s results, the reasoning behind the trade, and how we plan to manage the exposure after the release.

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