Nvidia: Why Markets May Shrug Off Chipmaker's Q4 Results

Nvidia(NVDA -1.29%) is set to report its fourth-quarter results after the market close on Wednesday, February 26, with analysts widely bullish on the AI chipmaker's stock. However, the market may not react as strongly as expected to the company's earnings, given the recent emergence of Chinese AI startup DeepSeek and the broader market trends. In this article, we will explore why markets may shrug off Nvidia's Q4 results and focus on broader trends instead.



Nvidia's strong performance in the AI chip market has driven its stock price higher over the past year, with shares gaining about three-quarters of their value. The company's dominance in the AI chip market, with a market share of up to 95%, has allowed it to capitalize on the growing demand for AI chips and maintain high profit margins. However, the recent emergence of Chinese AI startup DeepSeek has raised concerns about potential competition for Nvidia in the AI chip market.



Analysts have suggested that this competition could ultimately prove positive for Nvidia, as it may push the company's American clients to step up their efforts in the AI race instead of pulling back. However, the market may focus more on broader trends and less on individual company performance, given the following factors:

1. Growing AI infrastructure spending: Large tech firms, such as Meta, Microsoft, Google, and Amazon, are set to spend a collective total of $325 billion this year alone on AI infrastructure. This spending is expected to increase nearly three-fold to around $690 billion over the next three years, more than the market value of Visa and just shy of JP Morgan Chase. This trend suggests that the market may be more interested in the overall AI infrastructure spending than in the performance of individual AI chipmakers like Nvidia.
2. Diversification of AI chip suppliers: While Nvidia remains the dominant player in the AI chip market, other companies, such as AMD and Intel, are also making strides in the AI chip space. This diversification may lead the market to focus more on the overall AI chip market trends rather than on the performance of a single company.
3. Geopolitical concerns: The recent U.S. restrictions on exporting advanced AI semiconductors to China have impacted Nvidia's data center revenue. Although the company has addressed these concerns and reset its product offering for China, geopolitical tensions may continue to influence the market's reaction to Nvidia's results.

In conclusion, while Nvidia's Q4 results may still be closely watched by investors and analysts, the broader market trends, such as growing AI infrastructure spending, diversification of AI chip suppliers, and geopolitical concerns, may have a more significant impact on the market's overall sentiment. As a result, markets may shrug off Nvidia's Q4 results and focus on these broader trends instead.