By Aditya Soni
(Reuters) – Nvidia’s much-awaited results – seen as a barometer of AI chip demand – on Wednesday could prove to be a turning point for the artificial intelligence stocks that have fueled the market’s rally in the last two years.
Investors have raked in big gains from the AI boom led by the so-called “Magnificent Seven”, a group of tech giants that includes Nvidia, Microsoft and automaker Tesla, since the debut of ChatGPT in November 2022 — hailed as AI’s “iPhone moment”.
But lately, the group has taken a few hits.
The launch of low-cost AI models from China’s DeepSeek last month wiped off more than half a trillion dollars from Nvidia’s market value in a day. Adding to the tumult, an analyst report suggested Microsoft was scrapping some data center leases.
The Magnificent Seven stocks have retreated from their late-2024 peaks and the group is in correction territory, with the Roundhill Magnificent Seven ETF down more than 11% since its December 17 closing high.
But Nvidia, which has routinely exceeded analyst estimates over the last two years, has been able to assuage investor worries about the spending spree.
The magnitude of those revenue beats, however, has been narrowing as the company faces tough comparisons from robust growth a year ago. That has weighed on the market reaction after its results over the past two quarters.
“Nvidia has the heavy task of lifting the market mood this week. If it cannot, the selloff in stocks could accelerate,” said Ipek Ozkardeskaya, market analyst at Swissquote Bank.
“Hopes rest on Nvidia’s shoulders.”
The stock was up 3.3% on Wednesday, lifting the chip sector as well as the broader U.S. stock market after a selloff due to a dour consumer confidence report.
The Mag Seven stocks added roughly $11 trillion in market value between the debut of ChatGPT in November 2022 and a peak in mid-December 2024.
Nvidia, the world’s second most valuable company, has been the top beneficiary of Wall Street’s picks-and-shovels AI trade, adding about $2.7 trillion in market value in that time.
The company’s near-1,800% surge in the last five years makes it the leader of the Mag Seven. Those stocks have on average more than tripled in that time, while the benchmark S&P 500 has gained about 65%.
So far in 2025, those stocks have stumbled. The Mag Seven is down about 4.5%, while the rest of the S&P 500 has gained about 4.4% – so the entire index has eked out a mere 1% rise.
Options imply a 9.0% swing for shares of the AI bellwether in either direction after the results, slightly larger than the stock’s average move of 7.6% on the day after results over the last 12 quarters, according to analytics service ORATS.
Despite its blistering rally, Nvidia stock is trading at a lower premium as earnings estimates have climbed faster than its share price. The stock trades at about 28 times expected earnings, down from 36 a year ago and a peak above 80 in June 2023, LSEG data showed.
Still, a recent stumble in January after DeepSeek unveiled lower-cost models underscored the risks of the AI trade.
“DeepSeek rattled investors but given Nvidia’s first-mover advantage and the huge infrastructure investment plans from tech giants like Meta, it’s an indication that Nvidia’s high-end chips will remain in demand,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.
(Reporting by Aditya Soni in Bengaluru; Editing by Arun Koyyur)
