NVDA earnings scheduled for Wednesday have sparked concerns about fake AI chip demand tied to circular investment patterns. The NVDA stock price faces pressure as analysts question whether revenue growth is artificially inflated. Even more, Dow Jones futures are reacting to fears of a NVDA AI bubble.
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NVDA Stock Price Risks Rise As Dow Jones Futures Eye Nvidia AI Bubble
The Circular Financing Pattern Behind NVDA Earnings
Wall Street research firm NewStreet Research has estimated that for every $10 billion Nvidia invests in OpenAI, it will see $35 billion worth of GPU purchases or GPU lease payments. This fake AI chip demand concern centers on circular deals where Nvidia invests billions into AI startups like OpenAI, which then use that money to buy Nvidia chips.
Jay Goldberg, who is an analyst with Seaport Global Securities, said the deals had a whiff of circular financing and were emblematic of “bubble-like behavior.”
Stacy Rasgon, an analyst with Bernstein Research, wrote:
The action will clearly fuel ‘circular’ concerns.
Market Impact on NVDA Stock Price and Dow Jones Futures
With a market cap around $4.4 trillion, Nvidia accounts for roughly 8% of the S&P 500. Options pricing suggests the NVDA stock price could swing 7% either way by week’s end. The Dow Jones futures signal broad concern about the Nvidia AI bubble affecting retirement accounts.
Dennis Follmer, chief investment officer at Montis Financial, stated:
A great earnings report with higher guidance from Nvidia really shouldn’t surprise anyone, but it may reinforce concerns over seemingly limitless AI capital budgets.
Louis Navellier of Navellier & Associates noted concerns about “the circular financing agreements among the builders of the massive data center buildouts, which are the big buyers of Nvidia chips.” The shares have added over one-third of their value this year.
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Wednesday’s NVDA Earnings Could Validate or Expose Fake AI Chip Demand
What CEO Jensen Huang has to say Wednesday about the company’s outlook could either validate or challenge these fake AI chip demand concerns that have been building up. The NVDA earnings event is being widely viewed as the biggest earnings event of this season right now. Most Wall Street analysts surveyed by Visible Alpha still believe the stock has room to rise, but the questions persist.
The Dow Jones futures and broader market indexes will likely react significantly to whatever gets reported, as the Nvidia AI bubble narrative continues to dominate discussions among investors about AI valuations and where the NVDA stock price might be headed. Some analysts think strong guidance could calm fears, but others remain skeptical about the sustainability of current growth rates and valuations in the AI sector.