On June 18, 2025, Silicon Valley finds itself suspended in a delicate balance between anxiety and anticipation as it awaits a financial report from Nvidia, a company revered as a titan within the tech industryThis quarterly earnings report, set to be unveiled after the market closes on Wednesday, is being heralded as a "fate-defining judgment for the AI era." Nvidia, boasting a staggering market capitalization of $3 trillion, has endured a year-long price stagnation since surging to an all-time high of $750 per share last JuneThe intersection of breakthrough technology via DeepSeek and reductions in data center expenditures driven by Microsoft signals that this report will serve as a litmus test to assess the authenticity and sustainability of the AI industry’s current fervor.

The AI sector has become akin to a modern-day "Rashomon," where varying perspectives vie for attentionAnalyst Jeff Sica of Circle Squared Alternative resonates with caution, advising that "this could be the first needle to pop the AI bubble." Sica, who accurately pinpointed Nvidia’s stock as a strong buy in 2018, is now liquidating portions of his holdings

Advertisements

He argues that the market’s expectations for Nvidia have reached a point of "irrational exuberance," with Bloomberg consensus anticipating an 87% year-over-year increase in its data center revenue, alongside gross margins set to exceed 75%. For these optimistic projections to hold, there's an essential need for AI computational demand to explode at a pace that far exceeds Moore's Law.

Nevertheless, changes within the industry landscape are perceptibly unfoldingThe fifth-generation AI chip developed by the Chinese startup DeepSeek offers performance density that surpasses Nvidia’s H200 by 1.8 times while coming in at just 60% of the costDubbed the "Chinese Jensen Huang," this technological advancement undermines Nvidia's pricing powerReports indicate that Microsoft’s Azure cloud services unit has quietly slashed its Nvidia chip orders by 20%, instead opting for customized servers powered by DeepSeek’s chipsAlarmingly, four out of the top ten global cloud service providers are now testing non-Nvidia solutions— a scenario that was unthinkable just a year prior.

Concerns shared by bearish factions extend beyond mere alternatives in technologyA supply chain study by Bank of America reveals that AI chip inventory days have escalated from 45 days in Q3 2024 to a staggering 68 days, setting a new historical highThe head of AI infrastructure at Meta Platforms disclosed that "we are optimizing existing compute resources rather than blindly expanding." This shift presents a direct challenge to Nvidia’s growth narrative, given their revenue Compound Annual Growth Rate (CAGR) of 42% over the last three years— of which 70% stemmed from data center business.

Conversely, bullish advocates remain steadfast in their confidence

Advertisements

Mizuho analyst Jordan Klein emphasizes, "the market underestimates the intensity of the AI arms race." His research team anticipates that the AI R&D budgets for the world’s top 20 tech companies will surpass $250 billion by 2025, marking a 63% year-on-year increaseFurthermore, pre-orders for Nvidia's new Blackwell chip have reportedly exceeded 2 million units, tripling its projected shipments for 2024. Such a supply-demand imbalance has given rise to "AI chip scalpers," with prices for an H200 unit at the Huaqiangbei electronics market in Shenzhen soaring to $48,000, a 60% premium over the official guide price.

Melius Research's Ben Reitzes interprets Nvidia's market positioning from a geopolitical lens: "As OpenAI and xAI engage in a computational arms race, Nvidia is the sole player capable of providing trillion-dollar infrastructure." Data shows that 92% of the TOP500 supercomputers globally utilize Nvidia GPU acceleration, presenting an ecological barrier that seems insurmountable in the short termAs Elon Musk poignantly stated during a strategic meeting for xAI, "Without Nvidia chips, our AI models will lag by at least two years."

The heart of this bullish versus bearish dichotomy lies in differing judgments regarding the trajectory of AI technologyShort sellers argue that innovations represented by DeepSeek herald an "efficiency revolution," which could drastically alter hardware dependenciesIn contrast, bulls are convinced that "algorithm iteration will always necessitate more robust computing power." Recent research from Stanford shows that the computational requirements to train a trillion-parameter model increase tenfold every 3.4 months, significantly outpacing hardware performance enhancements

Advertisements

This "computational black hole" effect is reshaping the semiconductor industry's dynamics, where 70% of TSMC's 3nm manufacturing capacity has already been reserved by Nvidia for the production of the next-generation Blackwell chips.

The equity market's reactions have been nothing short of dramaticOn June 17, a rare class of "doomsday put options" appeared in Nvidia’s options market, with investors committing $120 million to buy put options expiring in December 2025, exercising at a price of $400 per share, essentially betting the stock could halve in value within six monthsParallelly, Cathie Wood of ARK Invest continues to bolster her Nvidia stock holdings, causing the Nvidia share of her flagship ARKK fund to climb to an impressive 18%. Such divergent moves underscore a stark disconnect in market perceptions of AI's future potential.

In the background, subtle shifts in the industry ecosystem corroborate an emerging narrativeGoogle Cloud announced a collaboration with AMD to develop AI chips, while Amazon’s AWS unveiled its self-developed inference chip, Trainium2. These activities are perceived as efforts to counter Nvidia's dominanceYet Nvidia counterattacks fiercely: its newly launched AI Foundry cloud service has attracted over 3,000 startups, generating a complete "hardware + software + ecosystem" loopAn analyst at UBS highlighted, "Nvidia's moat lies not just in its chips, but also in the developer network formed by its CUDA programming framework."

The forthcoming earnings report is set to pivot based on three critical data points: the quarter-over-quarter growth rate of data center revenue, the shipment forecast for the Blackwell chip, and the revenue contribution from the Chinese market

Should the data center revenue growth rate fall below 80%, or if Blackwell shipments slip beneath 1.5 million units, it could trigger technical sell-offsConversely, if management raises its full-year guidance, short-sellers may cover their positions, potentially pushing the stock price past the $800 threshold.

At this critical juncture in the AI industry, Nvidia's report does not merely concern the fate of a single company—it stands as a defining moment for the future direction of the entire sectorAs engineers at DeepSeek calibrate chips in their Shenzhen lab, Nvidia's R&D team is busy testing quantum computing prototypes at their headquarters in Santa Clara.