Prediction: The Puzzle Pieces Are in Place for Nvidia to Disappoint Wall Street on Nov. 19

Core Viewpoint - Investors may be overly optimistic about Nvidia's upcoming earnings report, with expectations set high despite potential competitive pressures and historical valuation challenges [3][11][18] Company Overview - Nvidia has become a leading player in the AI revolution, recently reaching a market capitalization of $5 trillion, driven by its dominance in AI graphics processing units (GPUs) [2][5] - The company is expected to report approximately $55 billion in sales for fiscal 2026 third quarter, reflecting a 56% increase year-over-year, alongside a profit of $1.25 per share [10] Competitive Advantages - Nvidia holds over 90% market share in AI-GPUs deployed in high-compute data centers, attributed to superior hardware and GPU scarcity [5][8] - The company has established a robust innovation cycle, with plans to release a new advanced GPU annually, maintaining its competitive edge [6][7] Market Dynamics - Demand for Nvidia's GPUs significantly exceeds supply, allowing the company to command a pricing premium and achieve a gross margin above 70% [8] - Major partnerships, such as with OpenAI, further solidify Nvidia's position in the market [9] Competitive Pressures - Increasing competition from other chipmakers, such as Advanced Micro Devices, is beginning to impact Nvidia's market position, with some customers opting for alternative solutions [12] - Internal competition from major clients developing their own AI hardware could reduce Nvidia's market share and pricing power [13][14] Valuation Concerns - Nvidia's price-to-sales (P/S) ratio is nearing 31, which is historically high for companies at the forefront of innovation, suggesting potential valuation headwinds [16] - Historical trends indicate that companies leading new technological innovations often experience valuation corrections, raising concerns about Nvidia's ability to sustain its current premium [17]