Nvidia's Strong Earnings Trigger Rally That Quickly Fizzles, Reviving AI Bubble Concerns

Nvidia’s third-quarter financial results delivered precisely what a nervous market needed on Thursday—a moment of stability in the volatile AI trade. Yet that moment proved fleeting. The semiconductor powerhouse reported impressive metrics: $57 billion in quarterly revenue, representing a 62% year-over-year surge, with its data center segment generating $51.2 billion (up 66% annually). Management painted an equally optimistic picture, guiding for $65 billion in the current quarter, substantially surpassing Wall Street consensus.

The numbers initially sparked enthusiasm across technology and semiconductor equities. Nvidia’s own stock rose approximately 5% at the open, catalyzing a broader market rebound. The S&P 500 and Nasdaq each climbed over 1%, while the Dow briefly rallied 700 points. This momentary relief reflected genuine hunger for reassurance amid weeks of anxiety surrounding lofty AI valuations and accelerating capital deployment.

By midday, however, the script flipped. All three major indexes retreated into negative territory, with Nvidia surrendering its gains and sliding lower. A robust September employment report provided temporary support, but traders quickly pivoted focus to Federal Reserve rate-cut expectations. According to CME FedWatch data, the probability of a December rate reduction remained below the 50% threshold, dampening sentiment that had just begun to stabilize.

The dramatic intraday reversal exposed the fragility underlying current market dynamics. David Rosenberg, the economist and president of Rosenberg Research, noted the outsized influence Nvidia exerts: “It has been many decades since one stock could move the market like Nvidia.” He credited the earnings with momentarily breaking through the prevailing gloom surrounding growth equities. Wedbush Securities analyst Dan Ives similarly emphasized Nvidia’s centrality to artificial intelligence advancement, highlighting CEO Jensen Huang’s commentary on enterprise customer demand as particularly compelling.

Yet skepticism lingers. Rosenberg, historically cautious on the sector, remains convinced valuations have inflated to “bubble of epic proportions.” He questions whether AI markets can expand eighteenfold within five years as current price-to-growth multiples imply. This tension—between genuine operational strength and unsustainable valuation structures—defines the current AI landscape.

Nvidia’s results offered momentary validation of the artificial intelligence investment thesis. The data center’s robust expansion and the company’s elevated guidance confirm robust client demand. Simultaneously, the market’s inability to sustain this enthusiasm highlights how precarious investor conviction remains regarding long-term profitability and competitive durability in this capital-intensive sector.