Nvidia Faces Challenges Ahead of Earnings Report

Investing.com — Nvidia, a key player in the semiconductor sector and the tech rally, is facing increasing challenges prior to its anticipated earnings report, according to analyst Jordan Klein from Mizuho (NYSE:MFG).

In a note to investors, Klein, a prominent Nvidia (NASDAQ:NVDA) bull, warned that the company's shares are "modestly at risk" due to heightened market pressures and changing investor behavior.

Klein highlighted a mix of sector-wide weakness and specific issues related to Nvidia's latest Blackwell systems, which have experienced overheating concerns.

> "Futures indicated higher this morning, but the negative news out on overheating issues in Nvidia's new Blackwell systems has me incrementally worried about Semis," Klein remarked.

He expressed skepticism about the sustainability of early gains in tech stocks, given the current market dynamics:
> "There is just so much quant, passive and fast momentum money swirling around in markets these days and I assume that style sells first, asks questions later."

The semiconductor sector has already seen pressure, with Applied Materials (NASDAQ:AMAT)'s disappointing guidance last week further intensifying concerns.

> "Friday's trading action was just a terrible sign for the Tech sector," Klein noted, mentioning a shift in investor sentiment towards finding "any and every reason to sell," rendering semiconductor stocks particularly vulnerable.

Klein stressed the significance of Nvidia's upcoming earnings, given its position as the most-followed stock in the market.

> "A terrible reaction to a mixed print and guide from semi cap AMAT puts even more focus and pressure on Nvidia to halt the decline with a strong enough beat and guide," he explained.

He also cautioned that Nvidia's current valuation presents a higher challenge than in previous quarters.

While Klein maintains optimism regarding Nvidia's long-term prospects, he underscored the risks of immediate downside pressure, notably from retail and momentum-driven investors who are prone to reacting to headlines and initial stock movements.