Tech Rally Sputters Ahead of Nvidia Earnings. What to Know

Is the powerful AI sector finally out of breath? With valuations that stretched, some investors fear if we all took it too far.

After months of seemingly unstoppable gains, the tech trade is finally showing signs of fatigue. Stocks are back in the red this week, with technology — the sector that’s carried the entire market on its silicon shoulders — leading the declines.

The S&P 500 SPX, up more than 35% since its April lows and boasting 36 record closes this year, has been powered almost entirely by a handful of tech heavyweights.

The Magnificent Seven now make up nearly 40% of the index’s market value and roughly a third of its earnings.

But now, investors are wondering if the rally’s run too far, too fast. The question echoing across trading desks: Is AI finally out of breath?

💸 The Price of Perfection

It’s not that tech earnings have been bad — in fact, they’ve been stellar. Microsoft MSFT, Amazon AMZN, Meta META, and Alphabet GOOGL all beat expectations last week and promised even more AI spending next year. Translation: more orders for Nvidia’s chips, more data centers, more server farms, more everything.

But good news isn’t moving the needle right now. When valuations stretch this far, even “great” can start to look “meh.” Investors are realizing that the higher you climb, the thinner the air gets.

The entire AI complex — from semiconductors to cloud computing — now trades at multiples that assume not just perfection, but sustained, exponential perfection. And that’s a tough sell when rates are still relatively high, inflation is sticky, and the Fed remains data-deprived thanks to a looming government shutdown (now the longest in history).

🧠 Nvidia: The Market’s Favorite Crystal Ball

Which brings us to Nvidia NVDA — the stock that can save the day. The chipmaker reports fiscal third-quarter earnings on November 19, and it’s shaping up to be a defining moment for the entire market.

Expectations are sky-high: analysts see earnings per share of $1.25, up from $0.81 a year ago, and revenue of $54.6 billion, a jaw-dropping 56% increase from last year’s $35 billion.

If Nvidia delivers (again), it could reignite the rally and remind investors why they fell in love with AI in the first place. But if there’s even a hint of deceleration — a cautious forecast, a whisper of supply constraints — the selloff could accelerate.

Simply put: as goes Nvidia, so goes the market. Fast fact: Nvidia washed out more than $450 billion from its valuation in just the last three days.

🔌 The Waiting Game

With two long weeks until Nvidia’s report, traders are stuck in a sort of limbo. Without a fresh catalyst, the market could decide to churn sideways — or drift lower — as profit-takers cash in on their massive gains.

The uncertainty isn’t helping either. A government shutdown delays key economic data, leaving the Fed flying in the dark just as investors are trying to gauge when rate cuts might actually arrive.

That means more guesswork, less conviction, and a good chance of exaggerated market swings.

So don’t be surprised if volatility ticks higher before Nvidia’s big reveal — the gem of the earnings calendar.

Off to you: How do you see the next two weeks unfolding? And, more importantly, are you bullish or bearish on Nvidia’s earnings report?