Option sellers made out like bandits yesterday as NVDA’s results were the equivalent of “no news is good news.” In aftermarket trading, the stock jerked around in a small $5 range. As I write this morning, NVDA is up only 40 cents on yesterday’s close.

In case you’re wondering, NVDA has been one of the driving forces of the markets for the past decade. As the world’s second-largest corporation after Apple, NVDA has a market capitalization of $3.2 trillion and has the second-highest weighting in the S&P 500.

Yesterday’s results were highly anticipated but ultimately led to, well, not so much. But is this the end of the story for now? I think not, and I’ll explain why.

The Results

For the fourth quarter ending January 26, 2025, NVDA reported a remarkable revenue of $39.3 billion, a 78% increase year over year. The company's data center segment drove the surge, with its revenue climbing to $35.6 billion, a 93% year-over-year growth. Net income for the quarter came in at $22.1 billion, an 80% increase from the previous year. These figures show NVDA's robust growth trajectory and successful AI market penetration.

Here’s a snapshot of the key figures:

• NVDA reported revenue of $39.3 billion for the January quarter, up 78% from a year earlier.
• Analysts had expected $38.1 billion, according to a FactSet-compiled consensus.
• Data center revenue rose 93% to $35.6 billion.
• Earnings came in at 89 cents per share.
• Net income rose 80% to $22 billion. Analysts had expected $19.42 billion.
• NVDA forecasts about $43 billion in sales this quarter, above the $42 billion analysts had been expecting.

The overwhelming demand for NVDA's Blackwell AI chips significantly contributed to this financial upswing. These advanced processors have become integral to major tech companies, including Microsoft, Amazon, Meta, and Alphabet, as they expand their AI infrastructures. The rapid adoption of Blackwell chips underscores NVDA's technological leadership and ability to service the AI industry.

Technically Speaking…

The below chart may look weird to you, but let me explain.

It’s called an Ichimoku chart or a cloud chart. The clouds get layered over candlesticks, which were also invented in Japan. I will keep this simple: A Green cloud is bullish. A red cloud is bearish. When the candlesticks (price) fall below a red cloud, it’s especially bearish. The thick green line is called the lagging line, confirming the move. That is, if a lagging line falls below the cloud after the candlesticks do, it confirms a bearish stance.

I’ve oversimplified this explanation to keep this Rude under 10,000 words.

The blue “1” on the chart is the latest candlestick, which you see below the cloud. The blue “2” on the chart denotes the lagging line, also below the chart. The blue arc over the top of the price structure is 9 months of rangebound price movement. That is, NVDA hasn’t moved much in the last 9 months. What’s more, it looks toppy.

That doesn’t mean it can’t recover its strength and head north again. But after such great earnings, not much happened to the stock. So that may indicate the market is getting tired. After all, if you were going to own NVDA, wouldn’t you have bought it already?

As a result, I’m bearish on NVDA. That’s what this chart is telling me: don’t buy here. In fact, a cheeky bet to the downside in the form of a put may not go amiss. (Disclosure: I’m long 1 NVDA put. Tiny position.)

If I’m right and NVDA trades down, what are the implications?

The Market Implications

If NVDA trades down significantly, the implications will be significant for the stock and broader market.

NVDA is among the most important tech stocks, alongside giants like Microsoft, Apple, and Alphabet. A decline in NVDA could signal that investors are reassessing their growth expectations for AI and tech.

NVDA is part of the "Magnificent Seven" (Apple, Microsoft, Alphabet, Amazon, Tesla, Meta, and NVDA), which drive much of the S&P 500's gains. If NVDA drops, it could drag the entire group down, leading to broader market weakness.

Many hedge funds and institutions are heavily invested in NVDA. A sell-off could trigger margin calls, algorithmic trading reactions, and broader liquidations across tech stocks.

AI Bubble Concerns

NVDA has been on a meteoric rise due to its AI dominance. A sharp decline could make investors question whether AI stocks have been overhyped, leading to a sell-off across AI-related equities (e.g., AMD, Broadcom, Super Micro Computer, Palantir).

If NVDA falls despite strong earnings, the market may reevaluate AI's revenue potential or the future growth may already be priced in.

Impact on the Semiconductor Industry

NVDA is the bellwether for the semiconductor industry. A drop in NVDA would likely impact peers like AMD, Broadcom, Qualcomm, and Taiwan Semiconductor Manufacturing Company (TSMC).

If NVDA’s decline is due to supply chain disruptions, it could indicate issues that impact the entire semiconductor space, including companies that produce key components (like ASML and Applied Materials).

Broader Market Indexes Could Suffer

NVDA is a top component in the S&P 500 (SPX) and Nasdaq 100 (NDX). A sharp sell-off would weigh heavily on these indices, potentially triggering broader market declines.

My friend and colleague Greg Guenthner said, “For the broader stock market, if the earnings report excites the Street and buyers step in and push NVDA back toward $150 and new highs, there’s a solid chance the move re-energizes the bulls and drags some of these flailing tech stocks out of the mud.”

Despite the great earnings report, that didn’t happen.

Since many ETFs and index funds hold large amounts of NVDA, a decline could lead to selling pressure across multiple funds, exacerbating market weakness.

Risk Appetite and Interest Rates

If NVDA’s drop signals increasing investor risk aversion, investors may shift capital into defensive sectors like utilities, consumer staples, or even bonds. My preference is for gold, silver, and their miners.

Tech stocks are sensitive to interest rate expectations. If the Federal Reserve gets hawkish or inflation makes its expected comeback, high-multiple stocks like NVDA will get hit.

Wrap Up

Here’s the key: if NVDA drops because of profit-taking rather than fundamental weakness, it will be a buy-the-dip opportunity. The key is to watch how the market reacts in the following sessions, whether tech stocks recover or selling pressure spreads.

Have a great day.