A pivotal moment for the AI boom?
November 19, 2025, marks Nvidia’s fiscal third-quarter earnings release for 2025 (Q325), and investors are holding their breath. The chipmaker, long the poster child for the artificial intelligence revolution, finds itself at a crossroads. With shares having pulled back almost 13 per cent in recent weeks amid heightened scrutiny, Q325 report could either reaffirm the explosive growth narrative driving technology valuations or fuel fresh doubts about an overheated artificial intelligence (AI) sector.
Analysts anticipate revenue of around US$55 billion and adjusted earnings per share (EPS) near US$1.25, representing substantial year-over-year (YoY) growth but a slowdown from prior triple-digit surges. How investors react could determine the next trend for markets.
Nvidia’s dominance has propelled it to extraordinary heights, with the company’s market capitalisation briefly surpassing a US$5 trillion in late October.
The sell-off since then, however, reflects broader anxieties. The recent dip, alongside S&P 500 and Nasdaq volatility, stem partly from concerns that massive capital expenditures by hyperscalers – companies like Microsoft, Meta, Amazon, and Google – may not yield reasonable returns soon enough. One analyst suggests every iPhone user in the world will need to spend US$35 per month on an AI tool to generate enough revenue for the hyperscalers to generate a 10 per cent return on their anticipated capital expenditure (capex).
Critics also point to the “circular funding” loops, where tech giants invest in one another’s AI ventures while procuring vast quantities of hardware, creating an ecosystem vulnerable to disruption.
At the heart of the optimism is Nvidia CEO Jensen Huang’s recent commentary. He revealed a staggering US$500 billion in booked orders for Blackwell and upcoming Rubin chips through 2026, signalling unwavering demand from cloud providers and enterprises racing to build AI infrastructure. This backlog underscores the transformative potential of generative AI, from data centre expansions to advanced model training. If Nvidia not only meets but exceeds forecasts – particularly with robust forward guidance – it could dispel bubble fears and propel a market rebound.
The concern, however, is that a sharp rise in Nvidia’s quarterly receivables, which now represent 86 per cent of revenue (up from circa 50 per cent not long ago), is a sign that announced sales are nothing more than vapourware. Additionally, investors are worried the hyperscalers’ accelerating bond issues (US$120 billion so far) reflects a diminishing cash flow picture.
And there’s also the accelerating insider sales of Nvidia shares that have investors on edge.
Meanwhile, any hint of softening graphic processing unit (GPU) demand, margin pressure from production ramps, or geopolitical hurdles (such as ongoing U.S. export restrictions to China) could trigger sharp selling. Options markets imply a potential 7-8 per cent swing in Nvidia’s stock post-report, which, given its outsized weighting in major indices, could ripple across the broader market.
Stepping back, and as I have written many times before, the AI trade’s sustainability hinges on real-world monetisation. The problem for these General Purpose Technology (GPT) booms is that they are often perceived as ‘structural’ but the reality tends to be ‘cyclical’.
While capex from Big Tech has ballooned to support data centres and AI development, the payoff remains nascent for many participants. Commentators have noted that AI sceptics, such as Michael Burry, have warned of parallels to past tech manias, where hype outpaced fundamentals. But such descriptions are simplistic. Michael Burry’s criticism and his multi-million-dollar short trade rest on a more nuanced argument about depreciation and GPU useful life.
Proponents counter that AI represents a foundational shift, akin to the internet’s emergence, with long-term economic impacts already evident in productivity gains and innovation. They’re not wrong, I too believe AI will be a course-of-human-history-changing technology. The problem is that the path to getting new general-purpose tech into everyone’s hands usually involves a period of Creative Destruction.
Back to recent market moves, some investors see the current pullback as a temporary, healthy correction in an ongoing bull market, potentially broadening to sectors like financials, healthcare, and consumer goods amid favourable macro conditions – including Federal Reserve rate cuts and resilient U.S. economic growth under Trump’s pro-business policies. Others urge caution, noting elevated valuations and the risk of disappointment if AI spending plateaus without clear revenue acceleration.
Ultimately, Nvidia’s results will serve as a litmus test for the AI ecosystem’s health. A strong performance could reinvigorate enthusiasm, pushing indices toward new records and validating trillions in invested capital. A miss, however, might accelerate a rotation away from mega-cap tech, exposing vulnerabilities in a market heavily concentrated on a handful of names.
While AI’s promise is immense, past technology step changes have benefited consumers more than investors. Whether we’re at peak hype or the dawn of a sustained boom remains to be see. What is clear is that Nvidia’s numbers will echo across global equity markets for a while yet.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
He is also author of best-selling investment guide-book for the stock market, Value.able – how to value the best stocks and buy them for less than they are worth.
Roger appears regularly on television and radio, and in the press, including ABC radio and TV, The Australian and Ausbiz. View upcoming media appearances.
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