Nvidia earnings – out on Wednesday after the bell – are expected to be strong again, but investors are increasingly questioning whether the chip giant’s towering valuation can continue to withstand pressure from bond markets and elevated yields, says the CEO of global financial advisory deVere Group.
Markets are heading into Nvidia’s latest results with expectations once again set exceptionally high after a relentless rally driven by demand for AI and tech infrastructure.
Nigel Green says investors are right to expect another blockbuster set of numbers. But he warns that even the strongest earnings growth may struggle to fully offset mounting valuation concerns in the current macro environment.
“We expect great earnings from Nvidia again. Demand linked to AI and tech remains extraordinary and the company continues to dominate the most important growth theme in global markets,” says Nigel Green.
“However, valuations are becoming harder and harder to justify as bond markets continue to exert pressure on expensive growth stocks.
“Higher yields change the equation for investors.
“Future earnings become less valuable when discounted against rising rates, and that creates increasing scrutiny around companies trading at extremely elevated multiples.”
Nvidia has become the defining stock of the AI and tech boom, with investors pouring capital into companies seen as central to the next phase of computing infrastructure.
But, Nigel Green says, markets are now entering a more complicated phase where exceptional operational performance alone may no longer guarantee uninterrupted upside.
“Investors are no longer simply rewarding growth at any price.
“There’s growing sensitivity around valuations across the market, particularly in stocks that have already experienced extraordinary gains over a relatively short period.
“Nvidia continues to execute at an elite level, but expectations are now so elevated that even excellent results may not remove broader valuation concerns.”
The deVere CEO notes that Treasury yields and bond market volatility are becoming increasingly influential in determining sentiment toward high-growth tech companies.
“Bond markets matter enormously here,” says Nigel Green.
“As yields rise, investors have alternatives to equities that did not exist to the same degree during the ultra-low-rate era. That naturally places pressure on highly valued sectors.
“AI and tech remain a transformational long-term story, but the market is becoming more disciplined in how it prices future growth.”
He says the company’s earnings will still likely reinforce the structural strength of the AI buildout currently underway across global economies.
“No serious investor doubts the scale of the AI opportunity,” Nigel Green adds.
“The issue now is valuation sensitivity, not the quality of Nvidia’s business.
“Markets can simultaneously believe in Nvidia’s long-term dominance while also questioning whether current pricing already reflects years of future success.”
Nigel Green concludes: “Investors should expect strong numbers.
“But they should also expect markets to remain highly sensitive to valuation risks as bond yields continue to influence global asset pricing.”