Nvidia, a powerhouse in the semiconductor and AI sector, is set to release its third-quarter fiscal 2026 earnings on Wednesday after the market closes. With a remarkable trajectory that has seen its stock rise by 42% this year, there’s palpable excitement, albeit tempered by a recent 8% downturn since late October. The broader tech landscape has shown signs of cooling, with investor confidence shaken regarding the returns from significant AI investments.
The momentum for Nvidia kicked off earlier this year following its spring earnings report, which forecasted revenues almost double that of Wall Street predictions. This surprise ignited an AI investment frenzy that notably boosted the market by $3.5 trillion. However, recent developments have sown seeds of doubt. Meta Platforms suffered a nearly 20% decline after revealing aggressive AI spending plans during its October earnings call, contributing to a 5.8% decrease in the Magnificent Seven tech index. As the S&P 500 experiences one of its weakest Novembers since the financial crisis of 2008, the spotlight turns squarely back to Nvidia as it navigates through growing skepticism.
Wall Street analysts are cautiously optimistic, predicting Nvidia will report revenues of approximately $54.79 billion for the third quarter, marking a 56% year-over-year increase, while earnings per share are expected to hit $1.25 — a 54% rise from the previous year. Yet, with an increasing number of investors questioning the viability and timeframe for returns on AI expenditures, the stakes are higher than ever.
Investor Skepticism and High Expectations
The current market sentiment highlights significant skepticism regarding the profitability of AI initiatives, positioning Nvidia in a challenging spot. Analysts note that while Nvidia boasts a solid double-A credit rating and anticipates generating over $70 billion in net income this year, it must address the rising apprehensions surrounding AI spending. CEO Jensen Huang’s ambitious projection of $500 billion in sales from Blackwell and Rubin chips by 2026 is also at risk due to potential supply constraints.
Adding to the suspense, options traders are preparing for a dramatic response, with expectations of a 6.2% price swing in either direction following the earnings report — the highest anticipated volatility in over a year. This anticipation stems from Nvidia’s unique position in the market, unlike traditional AI service providers or infrastructure builders.
The Geopolitical Landscape and Chip Demand
Geopolitical factors complicate matters further. Current export regulations prevent Nvidia from selling its premier Blackwell chips to China, and demand for alternative versions tailored for the Chinese market has fallen short of expectations. Concerns loom that the U.S. government may impose stricter restrictions on next-generation chip sales to China, which could impact Nvidia’s prospects. In light of this, analysts like Oppenheimer’s Rick Schafer have upped their price targets to $265, citing insatiable demand for AI chips, while others like Susquehanna’s Christopher Rolland have boosted theirs to $230.
Certain analysts remain optimistic, viewing the forthcoming earnings report as a vital indicator for the tech sector. Dan Ives from Wedbush believes it will affirm the AI revolution, potentially serving as a positive catalyst for tech stocks heading into year-end. Conversely, Gene Munster of Deepwater Asset Management warns that more robust guidance could ignite concerns over excessive spending, while modest forecasts might indicate a quicker environment for growth normalization.
Critically, Nvidia enjoys a panoramic view of the AI market landscape, having already established itself in the AI hardware race and gaining insight into customer demand that few competitors possess. The stakes are undeniably high as the company prepares to reveal its latest earnings, an event that could either restore confidence in AI investments or further fuel skepticism among investors.
