Nvidia earnings day could be awkward? Renowned analyst: Even with strong performance, the market will remain "nervous and uneasy"

Renowned technology investor Gene Munster believes that on the eve of its earnings release, Nvidia is facing a dilemma: if its guidance is too strong, it will trigger concerns about over-investment; if it only raises guidance moderately, it will be seen as a sign of slowing growth. In either case, market volatility may ensue. However, he still emphasizes Nvidia's bright long-term prospects, noting that analysts' forecasts for the company's revenue growth in calendar year 2026 are expected to rise from the current 39% to about 45%.

Written by: Zhang Yaqi

Although the market generally expects Nvidia to deliver another strong earnings report, the AI chip giant is facing a "no-win" situation, where investor anxiety and market volatility may be triggered regardless of the earnings outcome.

Gene Munster, a well-known technology investor and analyst at Deepwater Asset Management, warned in a report released this Wednesday that Nvidia is facing a dilemma. He pointed out that overly strong guidance could exacerbate market concerns about over-investment in the AI sector, putting pressure on the stock price.

However, guidance that is only moderately raised may be interpreted by the market as an early sign that growth is normalizing faster than expected, which could also trigger a negative reaction. Munster believes this "damned if you do, damned if you don't" scenario adds significant volatility risk to the upcoming earnings release next week.

This tension reflects investors' complex mindset amid the AI boom. While the long-term outlook is optimistic, concerns about short-term valuations and investment pace are mounting. Nvidia's share price fell 0.5% in pre-market trading to $186.86.

Wall Street Expectations Still Have Room for Upward Revision

Despite the complex short-term market sentiment, Munster points out that Wall Street's growth expectations for Nvidia still have considerable room for upward revision. Jensen Huang revealed at an event that by the end of 2026, market demand for the company's Blackwell and Rubin series chips could reach $500 billions.

Munster analyzed that this outlook means current Wall Street consensus forecasts have at least 10% upside potential. He stated, "Currently, Wall Street's forecast numbers have only been raised by 4%, which means there is still about 10% growth left on the table." Analysts remain cautious partly due to ongoing supply constraints and varying paces of forecast revisions among institutions.

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

Investor Sentiment Cools, but Long-Term Outlook Remains Optimistic

Munster acknowledges that investor sentiment has cooled recently. SoftBank Group's complete exit from Nvidia positions, as well as Meta's warning that its spending growth next year will outpace revenue growth, have both heightened concerns about over-investment in the AI sector.

However, he emphasizes that the long-term opportunity remains bright. Munster remains bullish on Nvidia stock and believes that over the next two years, its growth will "remain at a higher level for a longer period":

"AI use cases, utility, and ultimately commercial monetization models will eventually emerge, because scaled intelligence itself is extremely valuable."

He added that as more profitable AI applications emerge, "the flywheel of AI transactions 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 pointed out that Nvidia's strong visibility in the data center business makes its stock "particularly attractive." He stated that based on Nvidia's current order backlog, the chipmaker is expected to achieve 50% revenue growth and 70% earnings per share growth in 2026, while its forward price-to-earnings ratio is a relatively modest 24 times.