According to MarketWatch, Nvidia has experienced “an extraordinary run” since ChatGPT launched just under three years ago, but there’s a curious pattern in its stock performance. Deutsche Bank Research found that while Nvidia typically performs strongly in the month leading up to earnings, its actual performance on the day and week after reports has been “slightly lower than its overall trajectory” on average. Jim Reid, Deutsche Bank’s global head of macroeconomic and thematic research, noted that tonight’s earnings arrive amid growing concerns about a tech bubble. What’s particularly interesting is that this could mark the first time Nvidia ends the pre-earnings month lower, as it’s currently roughly flat with one trading day remaining before the report.
Nvidia’s earnings paradox
Here’s the thing that makes Nvidia’s situation so fascinating. The company has become the world’s largest by market cap, basically the most valuable company in market history. Yet its immediate post-earnings performance consistently underperforms its overall trajectory. It’s like everyone gets so excited in the buildup that the actual results can’t possibly meet expectations. And we’re talking about a stock that’s been on an absolute tear since ChatGPT launched in late 2022. So why does this keep happening?
Tonight’s stakes
Tonight’s earnings feel different though. For the first time since this AI boom began, Nvidia might actually enter earnings without the typical pre-report gains. The stock is roughly flat for the month leading into tonight’s report after the U.S. closing bell. That’s unprecedented in the ChatGPT era. Jim Reid specifically highlighted that this comes at a moment when “concerns about a tech bubble are starting to build again.” The pressure is absolutely massive for Nvidia to deliver numbers that justify its position as the market’s most valuable company.
Bigger picture
Look, Nvidia’s hardware has become the backbone of the entire AI revolution. Every company rushing to implement AI needs their chips, from data centers to industrial applications where reliable computing power is non-negotiable. But the market seems to be treating Nvidia like it’s already priced in perfection. When you’re the largest company in history, there’s literally no room for disappointment. Every earnings report becomes a referendum on whether the AI boom has legs or whether we’re looking at another tech bubble. And given how crucial industrial computing has become across manufacturing and infrastructure, the stakes extend far beyond just stock prices.
What to watch
So what really matters tonight beyond the headline numbers? Guidance will be everything. The market needs to hear that demand isn’t slowing and that Nvidia can maintain its ridiculous growth trajectory. But here’s the real question: if Nvidia beats expectations and the stock still drops, what does that tell us about market sentiment? It might suggest that even good news isn’t good enough when you’re trading at these valuations. The pattern of post-earnings underperformance could continue simply because expectations have become completely untethered from reality.
