Nvidia (NASDAQ:NVDA) has been the flagship AI stock for the past two years and has been the biggest beneficiary of the AI boom. Most other AI stocks have been hanging in the balance in the past two months as DeepSeek spooked the market and Microsoft (NASDAQ:MSFT) recently pulling back on its data center contracts added more fuel to AI pessimism. Even Palantir (NASDAQ:PLTR) fell massively, ending the biggest rally since NVDA.
Today’s earnings call is now seen as a “make or break” event for the AI industry. Nvidia has been posted results that has trounced earnings expectations each quarter, and analysts expect it to do the same. If it can do that again in Q4, expect AI stocks to recover from this pessimism. Otherwise, AI stocks will likely tumble by double digits across the board. Let’s look at the scenarios that could unfold later today.
Wall Street has set extremely high expectations for Nvidia's fourth-quarter performance. Analysts project revenue to increase by approximately 73% year-over-year to $38.1-38.3 billion.
This figure exceeds Nvidia's own guidance of $37.5 billion (plus or minus 2%) provided during their Q3 earnings call.
Net income is expected to reach $21.08 billion, up significantly from $12.84 billion in the same quarter last year and EPS is projected to hit $0.84-0.85.
Nvidia could post revenue above $40 billion and exceed the 73.5% gross margin expectations by 100-200bps. This would counter concerns about margin pressures during the Blackwell transition.
EPS could also surpass projections by at least 10-15%. This is the bull case and would likely trigger a rally in the stock as the AI narrative wakes up.
Of course, Nvidia would have to supplement such a beat with a solid outlook.
Also, Chinese firms are increasing their orders before China’s AI progress prompts export restrictions. This could create a short-term effect that leads to a beat.
This could push Nvidia toward price targets of $175 from here or even the highest price target of $220 depending on how big the beat is.
As for the baseline, Nvidia could meet or slightly beat expectations. However, this would actually be seen as a miss by the market since Nvidia has been beating Wall Street’s expectations handily. It might trigger a mild selloff or NVDA could trade sideways.
The bearish case would be the most concerning outcome. Many are scared this could happen due to the impact of DeepSeek and the problems Nvidia has had with Blackwell.
