NVIDIA's earnings report day may be awkward? Well-known analyst: Even if the performance is strong, the market will be "nervous"

Despite the market's general expectation that NVIDIA will once again deliver a strong earnings report, the artificial intelligence chip giant is facing a "catch-22" dilemma, where regardless of the earnings report results, it may trigger investor anxiety and market volatility.

Renowned tech investor and Deepwater Asset Management analyst Gene Munster warned in a report released this Wednesday that NVIDIA is in a bind. He pointed out that an overly strong earnings guidance could exacerbate market concerns about over-investment in the AI sector, thereby putting pressure on the stock price.

However, a guidance that is only moderately raised could be interpreted by the market as an initial sign that growth is normalizing faster than expected, which could also trigger a negative reaction. Munster believes that this "no-win situation" adds significant volatility risk to the earnings report set to be released next week.

This tension reflects the complex mindset of investors amid the AI boom; although the long-term outlook is optimistic, concerns about short-term valuations and investment pace are intensifying. NVIDIA's stock price fell 0.5% in pre-market trading to $186.86.

Wall Street Still Sees Room for Upward Adjustment

Despite the complex short-term market sentiment, Munster pointed out that Wall Street still has considerable room for upward adjustment in its growth expectations for NVIDIA. Jensen Huang revealed at an event that by the end of 2026, demand for the company's Blackwell and Rubin series chips could reach $500 billion.

Munster analyzed that this outlook implies that the current general expectations on Wall Street still have at least a 10% upward potential. He stated, "Currently, Wall Street's forecast numbers have only been raised by 4%, which means there is still about 10% growth potential left on the table." The analysts' cautious stance is partly due to ongoing supply constraints and the varying pace of forecast revisions among institutions.

Nevertheless, Munster expects that as the market gradually digests NVIDIA's expanding AI product line, analysts' revenue growth forecasts for the company for the calendar year 2026 will be raised from the current 39% to about 45%.

Investor Sentiment Cools, but Long-Term Outlook Remains Optimistic

Munster acknowledged that recent investor sentiment has cooled. SoftBank Group's liquidation of its NVIDIA position and Meta's warning that its spending growth will exceed revenue growth next year have intensified concerns about over-investment in the AI sector.

However, he emphasized that long-term opportunities remain bright. Munster remains bullish on NVIDIA's stock and believes that its growth will "maintain a higher level for a longer period" over the next two years:

"The use cases, practicality, and eventual commercialization of AI will ultimately emerge, as the scalability of intelligence itself is highly valuable." He added that as more profitable AI applications emerge, "the flywheel of AI trading will accelerate," which will boost investor confidence and could drive up NVIDIA and other AI infrastructure stocks in the coming years.

Meanwhile, other analysts have also expressed confidence in NVIDIA. Bank of America analyst Vivek Arya reiterated his "buy" rating on leading data center and semiconductor equipment stocks.

Arya specifically noted that due to NVIDIA's strong visibility in its data center business, its stock is "particularly compelling." He stated that based on NVIDIA's current order backlog, the chipmaker is expected to achieve a 50% revenue growth and a 70% earnings per share growth by 2026, while its forward price-to-earnings ratio is only a relatively modest 24 times.