What Nvidia’s Blockbuster Quarter Tells Us About the State of the Stock Market and Artificial Intelligence Trade
After investors anxiously waited last week for artificial intelligence giant Nvidia (NASDAQ: NVDA) to deliver its fiscal 2026 fourth-quarter report, the company provided them with better-than-expected results and issued better-than-expected guidance for its current quarter. Furthermore, its gross margin guidance was solid.
Yet the stock fell by nearly 5.5% on Feb. 26, the day after the report. Here’s what Nvidia’s blockbuster quarter and Wall Street’s response to it tells us about the state of the stock market and artificial intelligence trade.
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Nvidia reported $1.62 adjusted earnings per share on $68.1 billion of revenue, handily beating the earnings of $1.53 per share on $66.2 billion in revenue that Wall Street analysts expected. Furthermore, management guided for revenue of roughly $78 billion in the current quarter. The consensus analyst estimates had only projected $72.6 billion. Moreover, that guidance figure does not factor in any assumptions of revenue from selling chips in China.
Nvidia also guided for full-year gross margins of about 75%, after delivering a 75.2% adjusted gross margin in the recent quarter, indicating that the company is maintaining its strong pricing power.
CFO Colette Kress also said that customers are excited to get their hands on the company’s next-generation AI platform, Vera Rubin, which will succeed the current Grace Blackwell platform. The first Vera Rubin samples have been sent to some customers, and Nvidia expects to begin production shipments in the back half of the year.
“We aren’t sure what else investors want to hear at this point,” Bernstein analyst Stacy Rasgon said in a research report following the earnings release. “We suppose the sheer scale of the numbers at hand may have investors a bit shook.”
After a blowout quarter, one would think that Nvidia would at the very least be trading a little higher. The stock has not performed particularly well so far in 2026, though it is still up over 42% in the past year. Nvidia now trades at a fairly reasonable 24 times expected forward earnings, considering it has grown its top line by 73% year over year and its earnings nearly doubled.
So what gives? Well, I think this tells you just how conflicted the market is about AI now. One issue is whether the hyperscalers, including Microsoft, Meta Platforms, Alphabet, and Amazon, will continue to spend as freely as they have. Together, those “Magnificent Seven” companies have guided for a total of $650 billion to $700 billion in capital expenditures in 2026, largely to fund AI infrastructure.
