TLDR
- Nvidia stock dropped 8% over two days this week as the August 27 earnings date approaches, with bargain hunters stepping in Wednesday
- Wall Street expects $1 earnings per share and $45.9 billion revenue, representing 47% and 53% growth respectively from last year
- OpenAI CEO Sam Altman warned that AI investments may be in a bubble, though he still believes AI is transformative long-term
- MIT research found that 95% of AI pilot programs showed little to no measurable business impact, with only 5% delivering rapid revenue growth
- Tech sector pullback was driven by concerns about ballooning valuations and questions about actual AI returns on investment
Nvidia shares took a beating this week, sliding 8% across two trading sessions before bargain hunters stepped in Wednesday afternoon. The chip giant shed roughly $350 billion in market value during the selloff.
The decline puts Nvidia on track for its second consecutive losing week. This marks the first such streak since April for the world’s most valuable company.
Wall Street is now focused squarely on Nvidia’s August 27 earnings report. Traders are positioning for what could be the next major catalyst for the stock.
Despite the recent volatility, Nvidia remains up 26% year-to-date. Option volume has surged ahead of the earnings announcement as investors prepare for potential fireworks.
The tech selloff wasn’t limited to Nvidia alone. Other AI-focused stocks including Palantir and Meta also declined this week as broader concerns emerged about the sector.
Earnings Expectations Run High
Analysts expect Nvidia to deliver strong results next week. Wall Street forecasts earnings per share of $1, representing 47% growth from the same period last year.
Revenue projections are even more impressive. Estimates call for $45.9 billion in quarterly sales, up 53% from last year’s $30 billion figure.
These numbers would underscore continued strong demand for Nvidia’s AI chips. Big Tech companies are expected to spend nearly $350 billion on capital expenditures this year, with much of that flowing to AI infrastructure.
Cloud providers and data centers remain Nvidia’s biggest customers. These hyperscale operators continue expanding their AI capabilities to meet growing demand.
Most analysts maintain bullish outlooks on the AI spending cycle. They argue that enterprise adoption is still in early stages, with more growth ahead.
AI Bubble Concerns Emerge
Part of this week’s selling pressure came from unexpected comments by OpenAI CEO Sam Altman. Speaking to The Verge, Altman suggested the AI sector might be experiencing bubble-like conditions.
“Are we in a phase where investors as a whole are overexcited about AI? My opinion is yes,” Altman said in the interview. He added that AI remains “the most important thing to happen in a very long time.”
The comments sparked fresh debate about AI valuations across the technology sector. Investors began questioning whether current stock prices reflect realistic expectations for AI returns.
Adding fuel to the fire was new research from MIT that painted a sobering picture of AI adoption. The study found that only 5% of AI pilot programs delivered rapid revenue acceleration.
The remaining 95% of companies in the dataset showed little to no measurable business impact from their AI initiatives. This data challenged the narrative that AI adoption is delivering widespread benefits.
The research highlighted that failed AI projects are the norm rather than the exception. Many companies struggle to find practical applications that generate meaningful returns on their AI investments.
Meta also contributed to the sector’s concerns this week. The social media giant announced another internal restructuring as it continues building its AI capabilities.
Even companies with massive AI budgets face organizational challenges in deploying these technologies effectively. The promise of AI transformation often clashes with corporate bureaucracy and execution difficulties.
Wedbush analyst Dan Ives pushed back against the pessimistic sentiment in a Wednesday note. He described the tech losses as a temporary blip and predicted skeptics would be proven wrong again.
Nvidia’s earnings report next week will provide the clearest test of investor confidence. Strong results could quickly erase this week’s concerns and send the stock higher.
