The Whole Financial World Is Terrified of Nvidia's Earnings Call

"Many AI companies have a problem, in the form of an astronomical gap between sky-high valuations and relatively meager revenues. In a sense, Nvidia is more grounded: it builds the physical chips that those companies use to power their AI models, meaning that if there's an AI gold rush, it's selling shovels. That's worked out well for Nvidia, which hit an unprecedented $5 trillion valuation last month."

"The stock market has taken another beating this week, continuing a weeks-long tech selloff that ignited over fears of a growing AI bubble. The S&P 500 is down almost 3.5 percent over the last five days alone. The Dow Jones Industrial Average has slid more than a full percent on Tuesday alone. Looming over it all is AI chipmaker Nvidia's Wednesday earnings call - results that could send ripples through rattled markets, for good or ill."

"The economic underpinnings remain largely theoretical. Despite immense enthusiasm, there still isn't a "clear financial model for profitable AI," as the Wall Street Journal noted last week, even as the "Magnificent Seven" - the tech megacorporations Nvidia, Microsoft, Apple, Alphabet, Amazon, Meta Platforms, and Tesla, all heavily invested in AI - represent a whopping 35 percent of the entire S&P 500 index."

Stock indices have declined sharply amid a weeks-long tech selloff driven by fears of an AI valuation bubble, with the S&P 500 down about 3.5 percent over five days and the Dow sliding over one percent in a single session. Nvidia's upcoming earnings call looms as a potential market catalyst because the company supplies chips that power AI models and reached a $5 trillion valuation. Heavy investment in data center buildouts ties broader economic activity to AI hardware demand. Many AI firms show large valuation-to-revenue gaps, and there remains no clear financial model for consistently profitable AI, concentrating risk among major tech firms.

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