Nvidia Corporation (NVDA) shares declined 2.8% to $219.05 on Monday, as investors trimmed positions ahead of the company's fiscal first-quarter earnings report scheduled for Wednesday after the market close. The stock had earlier touched an intraday high of $230.62. The pullback pulled down the broader semiconductor sector, with Advanced Micro Devices (AMD) losing 3.0% and Broadcom (AVGO) falling 2.2%.
The Philadelphia Semiconductor Index shed 3.8% as profit-taking swept through the chip industry. Rising Treasury yields added to the selling pressure. “Some profit taking” followed the recent rally, noted Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder, adding that investors were reacting to broader market softness.
Nvidia, now the largest company by market capitalization at approximately $5.36 trillion, is viewed as a bellwether for the artificial intelligence trade. Its earnings are widely seen as a test for the entire AI ecosystem, encompassing companies that supply hardware and software for machine learning and generative AI applications.
Wall Street consensus, as compiled by S&P Global using Visible Alpha, projects Nvidia will report quarterly revenue of $78.5 billion, with data center revenue alone expected at $72.8 billion. Data centers are the primary buyers of Nvidia's graphics processing units (GPUs), which are essential for training and running AI models. The company's earnings call is scheduled for 2 p.m. Pacific (5 p.m. Eastern) on Wednesday, with written remarks from CFO Colette Kress expected shortly after the results are released.
Analysts have been raising their price targets ahead of the report. Morgan Stanley's Joseph Moore lifted his target to $285, calling Nvidia a “top pick” among semiconductor stocks. KeyBanc's John Vinh increased his target to $300, citing improving shipments of Nvidia's Blackwell GPU architecture. However, the company faces headwinds, including U.S. export restrictions that have curtailed data center compute sales to China. If hyperscale cloud providers begin to scale back AI orders, even a revenue beat could fail to lift the stock.
Gross margin remains a critical metric for Nvidia's bull case. The company is guiding for a GAAP gross margin of 74.9%, plus or minus 50 basis points. High gross margins have historically been a hallmark of Nvidia's business model, reflecting its pricing power in a market where demand for its chips far exceeds supply.
Market participants are increasingly focused on the forward outlook rather than the current quarter's results. Demand for Nvidia's upcoming Blackwell and early Rubin systems may exceed Wall Street's current models. However, if Nvidia delivers only an in-line forecast, it could raise questions about whether the AI trade has outpaced the company's actual earnings trajectory.
