Nvidia's stock rose significantly in after-hours trading after the company reported third-quarter earnings that exceeded Wall Street's expectations, alleviating concerns about a potential AI bubble. The AI bellwether announced record sales and provided robust guidance for the upcoming quarter.
Nvidia surpassed analyst predictions, earning $1.30 per share on $57 billion in sales, compared to the expected $1.25 per share on $54.9 billion in sales. The company also projected fourth-quarter revenue of $65 billion, exceeding the market's expectation of $61.4 billion.
Nvidia CEO Jensen Huang stated that demand for their products has been "off the charts." The market closely monitors Nvidia because its stock price has a substantial impact on broader markets, with the company accounting for 8% of the S&P 500 index. Analysts described the quarter as "monster" and believe Nvidia's performance validates the ongoing AI revolution, suggesting fears of an AI bubble are overstated.
Nvidia is a critical player in the AI market, producing the essential chips for training and running AI models, which has propelled the company to become the world's most valuable. Its performance can significantly influence market direction, with some suggesting Nvidia has the ability to "make a market." Despite Nvidia's strong results, market jitters surrounding a potential AI bubble persist.
The rapid growth and investment in generative AI have fueled a tech stock rally, but uncertainty about the timeline of AI's impact and the increasing debt used to finance AI initiatives have shaken market confidence. Concerns about an AI bubble have led to recent market pullbacks and a losing streak for the S&P 500.
Other tech leaders, like Alphabet CEO Sundar Pichai, have acknowledged elements of irrationality in current AI investments and valuations, suggesting no company is immune if an AI bubble were to burst. A Bank of America poll indicated that over half of global fund managers are concerned about excessive spending on AI investments, with nearly half viewing an AI bubble as a significant "tail risk" for investing in 2026.
Nvidia's stock had previously experienced a decline due to some large investors divesting holdings, but the strong earnings report reversed this trend. Analysts emphasize Nvidia's foundational role in the AI revolution, stating that gauging demand for AI ultimately depends on Nvidia.
