Nvidia Faces Scrutiny Ahead of Earnings as Stock Underperforms Peers

Nvidia, once the world's most valuable company, faces increased scrutiny as it prepares to release its fourth-quarter earnings on February 26.

Tech concerns rise as Nvidia prepares to report Q4 earnings on February 26.

The company's stock has underperformed both its tech peers and broader market benchmarks over the past six months.

Market concerns center around three main areas: chip manufacturing capacity, artificial intelligence demand, and the emergence of cheaper alternatives for its largest customers. These factors have contributed to the company's recent market performance, with shares trading at $139.76 as of early Thursday.

A major market shock occurred in late January when the launch of China-based DeepSeek's AI Chatbot triggered a $593 billion single-day decline in Nvidia's stock value.

However, subsequent reports have questioned DeepSeek's claims, noting that the chatbot relied on high-end Nvidia chips that were actually restricted from export to China under Biden administration rules.

The hyperscaler market, comprising tech giants Meta Platforms, Microsoft, Google, and Amazon, continues to show robust spending plans. These companies are expected to invest a combined $325 billion in 2025 alone. Their three-year capital expenditure starting from 2023 is projected to reach approximately $690 billion.

Nvidia's new GB200 chip, built on the Blackwell processing architecture, has been in full production since December. The chip boasts improved speed and energy efficiency compared to previous “hopper” models. Industry analysts expect the GB300, the next iteration of the Blackwell line, to launch later this year.

Oppenheimer analyst Rick Schafer maintains an ‘outperform’ rating on Nvidia stock with a $175 price target. He predicts strong performance in both fourth-quarter results and the April-quarter outlook, driven by continued demand for AI accelerators from cloud service providers.

The company's older H200 processors may see stronger-than-expected near-term demand as the new Blackwell chip production ramps up. Schafer suggests that DeepSeek's emergence could actually benefit Nvidia as Western companies rapidly integrate new innovations into their models.

Q4 Earnings Report

Looking ahead to the fourth quarter earnings report, analysts project revenue of $38.5 billion and net income of approximately $20.9 billion. For the fiscal first quarter ending in April, expectations point to revenues of $42.1 billion, representing a 61.6% increase from the previous year.

Major tech companies are developing their own custom chips while maintaining relationships with Nvidia. These in-house processors, known as ASICs, are primarily used for internal workloads, while Nvidia's GPUs continue to serve broader, high-performance AI applications.

The competitive landscape includes partnerships between hyperscalers and companies like Broadcom and Marvell Technologies. However, analysts note that these custom solutions are expected to coexist with rather than replace Nvidia's processors.

Production capacity remains a key focus area. The company's finance chief Colette Kress described GPU demand as “staggering” during a November investor call, highlighting ongoing supply chain challenges.

Jensen Huang, Nvidia's CEO, will likely address several crucial topics during the earnings call, including the potential impact of DeepSeek on revenue forecasts and the company's strategy for maintaining market share amid increasing competition.

The company's six-month stock performance shows a gain of approximately 9.8%, lagging behind many of its tech sector peers. This performance comes despite continued strong demand for AI chips and robust revenue projections.

Management's guidance for the upcoming quarters will be closely watched by investors, particularly regarding Blackwell chip production volumes and adoption rates among major customers.