Nvidia Earnings: A Market on Edge as AI Capex Soars
Wall Street is bracing for Nvidia’s fourth-quarter 2025 earnings report, released today after market close, with a mix of optimism and anxiety. While analysts widely expect the AI chip giant to exceed estimates, concerns linger about the sustainability of current growth rates and the potential for a market correction. S&P 500 futures were up 0.14% this morning, following a 0.77% gain yesterday, suggesting a cautious optimism as traders await the results.
The AI Spending Boom: A New Dot-Com Bubble?
The surge in capital expenditure (capex) by major AI players – Amazon, Meta, and Alphabet – is fueling much of the current excitement. Wedbush Securities notes that hyperscale capital expenditure forecasts for 2026 have “ballooned,” with Amazon projecting 50% spending growth, Meta closer to 75%, and Alphabet potentially increasing spending by as much as 100%. This level of investment is drawing comparisons to the dot-com boom of the late 1990s.
Goldman Sachs estimates total hyperscaler capex will reach $667 billion in 2026, up 62% year-over-year. This represents over 90% of cash flows, exceeding levels seen during the dot-com era. While impressive, analysts at Goldman Sachs caution that a deceleration in growth is likely later in 2026, and valuations of some AI infrastructure stocks may be vulnerable to a slowdown in capex.
Investor Sentiment: Fragility Beneath the Surface
Despite the positive outlook, investor sentiment remains fragile. A recent “AI Doom” basket of 55 large-cap stocks, compiled by Bespoke Investment Group, has fallen to levels last seen in April of last year, coinciding with previous market anxieties. This suggests a lingering fear among investors that the current AI rally may be unsustainable.
One analyst, Xiao Lei of Kasikornbank, described the current market reaction to potential setbacks as akin to “a strong man suddenly break[ing] down in tears in a restaurant as there’s no chilli sauce on the table,” highlighting the pent-up anxieties driving recent sell-offs.
Nvidia’s Position and Analyst Expectations
Analysts at Wedbush maintain an “outperform” rating on Nvidia with a $230 price target, anticipating the company will comfortably beat estimates and provide optimistic guidance. Aletheia Capital recently upgraded the stock to a “Buy” rating with a $250.00 price target. Nvidia reported quarterly revenue of $57.01 billion and a net profit of $31.91 billion in its last earnings release, a significant increase from the $35.08 billion revenue and $19.31 billion profit reported the previous year.
However, ING expressed caution, noting that Nvidia will likely need to exceed consensus expectations and offer strong guidance to reassure investors. The downside risks from a miss appear greater than the potential upside from a beat.
Market Performance: Tech Lags Behind
The tech sector, while driving much of the market’s growth, has shown signs of weakness. Year-to-date, the Nasdaq Composite is down 1.63%, while the S&P 500 is up 0.65%. This divergence underscores the selective nature of the current market rally and the sensitivity of tech stocks to broader economic concerns.
Global Market Snapshot (February 25, 2026)
- S&P 500 futures: up 0.14%
- STOXX Europe 600: up 0.55%
- U.K.’s FTSE 100: up 0.95%
- Japan’s Nikkei 225: up 2.2%
- China’s CSI 300: up 0.6%
- South Korea KOSPI: up 1.91%
- India’s NIFTY 50: up 0.23%
- Bitcoin: $65.4K
Frequently Asked Questions
- What is driving the surge in Nvidia’s stock price?
- Strong demand for Nvidia’s AI chips, fueled by massive investments in data centers and AI infrastructure by companies like Amazon, Meta, and Alphabet.
- Are we in another tech bubble?
- Some analysts believe the rapid increase in capital expenditure by hyperscalers resembles the dot-com boom, raising concerns about a potential correction.
- What are analysts expecting from Nvidia’s earnings report?
- Analysts generally expect Nvidia to exceed estimates, but emphasize the importance of strong guidance for future growth.
- How is the broader market performing?
- While the S&P 500 is up year-to-date, the Nasdaq Composite is down, indicating a more selective market rally.
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