A renewed surge in Nvidia’s earnings outlook has intensified debate over whether the artificial intelligence boom is veering into bubble territory, even as analysts highlight the chipmaker’s strengthening financial foundations.
Global X senior investment strategist Billy Leung said Nvidia’s latest quarterly update has reinforced expectations that AI demand “remains durable and is rising”, noting that the company’s graphics processing units (GPUs) continue to underpin rapid growth across data centres.
According to Leung, Nvidia’s strong forward guidance “provides a clearer earnings anchor for 2025 and 2026” and may help steady broader equity markets following recent weakness in mega-cap technology stocks.
Nvidia, last week, became the first company to exceed US$5 trillion in market capitalisation, and Leung believes revenue visibility of more than US$500 billion from its Blackwell and Rubin chip lines could push the company toward US$6 trillion by 2026 if current momentum continues.
“GPU supply remains the key bottleneck to powering AI,” he said.
However, concerns over stretched valuations have been building across global markets.
AMP chief economist Shane Oliver noted that signs of an AI-driven bubble have accelerated, with the Magnificent Seven — Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta and Tesla — rising more than 30-fold over the past decade and accounting for “50 per cent or more” of US share market gains since 2023.
He warned that high price-to-earnings ratios and a compressed equity risk premium leave investors with “less of a buffer should things go wrong”.
Traders echoed similar concerns after Nvidia’s earnings initially lifted global equities before the rally faded.
Westpac observed that US markets opened higher on “NVIDIA’s consensus-beating earnings” but later reversed as “concerns about stretched technology stock valuations resurfaced”, with the S&P 500 sliding 0.9 per cent by the close.
Technology stocks fell 2 per cent, and the VIX volatility index spiked from around 20 to nearly 28.
Meanwhile, ANZ also reported that US equity markets “fell as doubts about AI valuations re-emerged”, with the S&P 500 down 1 per cent despite having been up nearly 2 per cent earlier in the session.
Still, Leung argued that investors are not late to the AI cycle. He said the next phase will be led by companies capable of sustaining earnings growth through innovation and efficiency rather than those “chasing association with the theme”.
Leung highlighted four structural drivers: the rapid shift from GB200 to GB300 chips, the “clean” progress of the Rubin platform, the rise of agentic AI and reasoning models requiring far higher compute, and Nvidia’s deeper integration across land, power, data centre infrastructure and financing.
Nvidia’s earnings call also pointed to accelerating demand in networking technologies such as InfiniBand, NVLink and Spectrum X, alongside a rebound in professional visualisation, which was boosted by workstation upgrades tied to AI workloads.
Leung added that the broader AI investment cycle is also benefiting “networking, power systems, data centre capacity, energy and key materials”, while strengthening the case for “second order beneficiaries in copper, uranium and industrial automation”.
More broadly, he said US technology giants remain exceptionally profitable. Based on 2026 estimates, Apple and Nvidia are forecast to deliver returns on equity of around 175 per cent and 90 per cent respectively, while Meta, Alphabet, Microsoft and ServiceNow all remain comfortably above the S&P 500 average of roughly 20 per cent.
Earnings per share for chipmakers Nvidia and Broadcom are projected to compound at around 35 to 40 per cent a year over the next three years.
At the same time, global strategists caution that stretched valuations, higher bond yields and uncertainty over central bank rate cuts could still trigger market volatility.
AMP’s Oliver said AI enthusiasm “has run ahead of itself”, but stressed that bubbles “don’t normally burst when there is so much talk about them”, and strong global profit growth remains an offset.
For now, Nvidia’s earnings continue to anchor sentiment — even as the debate intensifies over whether the AI boom is entering an overheated phase.
