Nvidia (NVDA) is preparing to release its highly anticipated third-quarter earnings after the bell on Wednesday, marking its first major update since the company’s market value briefly surpassed the $5 trillion milestone last month. The report comes at a delicate moment for Wall Street, as concerns around excessive AI investment, lofty valuations, and the potential overbuilding of data center capacity weigh heavily on investor sentiment.

Investor Anxiety Grows as AI Trade Shows Signs of Strain

Nvidia shares fell nearly 3% on Tuesday and have declined roughly 12% since their recent all-time high, reflecting growing caution among investors. While other major tech companies have posted strong earnings, Nvidia remains the definitive bellwether for the AI sector.

The stakes are high: according to data from ORATS, Nvidia’s earnings release could trigger a dramatic $320 billion market-value swing, potentially marking the largest post-earnings move in the company’s history.

Gene Munster of Deepwater Asset Management warned that Nvidia faces a “Catch-22,” noting that even strong guidance could fuel fears of overspending, while underwhelming guidance may be interpreted as an early sign of slowing growth.

Major Investors Scale Back Exposure as AI Competition Intensifies

The upcoming results follow a series of notable stock sales by prominent investors. Peter Thiel’s hedge fund exited its entire $100 million Nvidia position, while SoftBank also sold off its full $5.8 billion stake to redirect capital into its own AI ventures.

Competition is heating up across the industry, with AMD CEO Lisa Su forecasting the data center market could reach $1 trillion by 2030. This intensifying competitive environment makes Nvidia’s dependence on hyperscalers—Amazon, Google, and Microsoft—more concerning. The company frequently reports that around 50% of its data center revenue comes from these cloud giants, a reliance some analysts see as a potential vulnerability.

Skepticism Rises as Analysts Look for Sustainability in AI Spending

Investor Michael Burry, known for predicting the 2008 financial crisis, recently criticized major AI players—such as Meta and Oracle—for allegedly inflating earnings by understating data center depreciation costs. His comments added further skepticism to the already-fragile AI trade.

What Analysts Expect for Q3

According to Bloomberg consensus estimates, Nvidia is expected to report:

• Adjusted EPS: $1.26

• Revenue: $55.2 billion

• Data Center Revenue: $49.3 billion

• Gaming Revenue: $4.4 billion

• Gross Margin: 73.62% (down from 75% last year)

The company has reiterated that it is not modeling any revenue from China, despite hopes that a trade agreement could eventually restore chip shipments. Recent meetings between U.S. and Chinese leadership have not yielded any progress on this front.