Artificial intelligence has been the single most powerful driver of global stock markets since late 2022, reshaping investor strategies and propelling major technology companies to record valuations. Among them, Nvidia (NVDA) has emerged as the bellwether of the AI revolution, holding a dominant position in GPUs that fuel generative AI and machine learning. But with Nvidia set to release its latest quarterly results, markets are bracing for a pivotal test. Will the company’s performance reaffirm the AI rally—or expose cracks in a sector that has grown heavily concentrated around a few mega-cap names?
AI Trade: A Market Powerhouse
Over the last three years, the AI trade has transformed global equities. A basket of 50 AI-related stocks tracked by Bespoke Investment Group has gained nearly 170% since the end of 2022. Nvidia has been at the forefront, surging past a $4 trillion market cap and becoming the most valuable company in the world earlier this year. Its meteoric rise has made it not just a market leader, but the single most influential stock in the S&P 500, accounting for nearly one-quarter of the index’s total return this year.
Meanwhile, other AI beneficiaries—from Microsoft (MSFT) and Alphabet (GOOG) to utilities like Constellation Energy and Vistra—have also enjoyed outsized gains as the AI buildout drives soaring demand for power and infrastructure.
Investor Caution Creeps In
Despite the momentum, cracks are starting to show. The forward price-to-earnings (P/E) ratio of the S&P 500 now stands at 22.4, about 40% higher than its long-term average. For the tech sector, valuations are even steeper, with P/E multiples rising to 29.2—well above historical norms.
Some strategists warn that near-term expectations may be running too hot. As BCA Research’s Peter Berezin noted, “AI is a critical piece of what is driving stocks right now. But there’s a risk that some of the near-term expectations just won’t be realized.”
This is why Nvidia’s earnings report is seen as a litmus test—not just for its own future but for the trajectory of the entire AI trade.
Nvidia vs. Other AI Leaders: How Do They Compare?
To better understand Nvidia’s dominance, here’s a side-by-side comparison with other top AI stocks shaping Wall Street in 2025:
Nvidia vs Other Leading AI Stocks (2025)
| Company | Market Cap (Trillions USD) | AI Role | YTD Stock Performance (%) | Key Risks |
|---|---|---|---|---|
| Nvidia (NVDA) | 4.3 | Dominant AI GPU provider; core infrastructure for training & inference | 32% | Competition + export restrictions to China |
| Microsoft (MSFT) | 3.6 | Cloud leader (Azure) + AI copilots integrated into enterprise tools | 18% | High cloud infrastructure costs; AI ROI still unclear |
| Alphabet (GOOG) | 2.2 | Search AI (Gemini), Google Cloud AI, custom AI chips (TPUs) | 15% | Regulatory pressures + competition in search AI |
| AMD (Advanced Micro Devices) | 0.35 | Challenger in AI GPUs, strong in inference + EPYC CPUs in data centers | 27% | Dependence on catching up to Nvidia’s GPU dominance |
| Broadcom (AVGO) | 0.72 | AI networking hardware + custom silicon; VMware for enterprise AI cloud | 28% | Integration risks post-VMware; high debt levels |
| Palantir (PLTR) | 0.10 | AI analytics & government/military adoption; expanding enterprise AI tools | 100% | Valuation concerns; reliance on government contracts |
This table highlights that while Nvidia is the core engine of AI computing, other companies like Broadcom and AMD are capturing growth in networking and inference markets, while Microsoft and Alphabet expand AI across cloud services. Palantir has become the surprise standout, doubling its stock value this year on the back of government contracts and enterprise AI adoption.
The Market’s AI Concentration Risk
Another growing concern is market concentration. According to BCA Research, the combined market cap of the top 10 AI stocks—including Nvidia, Microsoft, and Broadcom—now equals $18 trillion, or 33% of the S&P 500’s total market capitalization. That’s more than double the share they held in 2022.
This level of concentration is reminiscent of the late 1990s tech bubble, when a handful of companies drove most market gains. While today’s fundamentals are stronger, it raises questions about whether AI enthusiasm has run too far, too fast.
What Investors Should Watch in Nvidia’s Earnings
Nvidia’s commentary this week could set the tone for AI markets into year-end. Investors will watch for:
- Data center demand: Is hyperscaler and enterprise AI spending accelerating or slowing?
- China exposure: How much of the company’s revenue is at risk from tariffs and export restrictions?
- New product cycles: Can Nvidia maintain annual chip refreshes without execution risks?
- Competition: Will AMD, Broadcom, or Big Tech’s in-house chips start to erode Nvidia’s moat?
Final Takeaway: Nvidia’s Earnings Could Reshape the AI Trade
The AI-driven rally has reshaped Wall Street, lifting everything from chipmakers to utilities. But as valuations climb and concentration risk increases, the stakes around Nvidia’s earnings couldn’t be higher. If the company delivers another blowout quarter, it could fuel the next leg of the AI boom and solidify Nvidia’s role as the most influential stock on the planet. If it disappoints, the AI trade could face its sharpest correction since the frenzy began.
For long-term investors, the bigger picture remains clear: AI is no longer a niche theme—it’s the backbone of modern markets. Nvidia may be the leader, but a diversified basket of AI-related companies could prove the smartest play to ride this once-in-a-generation shift.
Key Takeaways for Investors
- Nvidia is the bellwether of AI, driving nearly a quarter of the S&P 500’s returns this year.
- AI stock basket up 170% since 2022, showing the sector’s dominance.
- Valuations are stretched, with tech’s P/E ratio 36% above historical averages.
- Market concentration risk rising, with top 10 AI stocks making up one-third of the S&P 500.
- Nvidia’s earnings outlook will dictate AI sentiment into year-end.
Reference : Lewis Krauskopf