Nvidia Reports Earnings Next Month. Here's Why I'm Not Buying the Stock Before the Report.

Nvidia is set to report fiscal Q1 results on May 20 after posting fiscal Q4 revenue of $68.1B, up 73% year over year, with data center revenue rising 75% to $62.3B and management guiding for $78B in fiscal Q1 revenue, plus or minus 2%. The article argues the stock remains fundamentally strong but highlights rising competition from Broadcom, Amazon custom chips, and Alphabet TPUs as a potential long-term margin and growth risk. The piece is more a valuation and competition warning than a new operating update, so the immediate market impact is likely modest.

Analysis

The market is still treating NVDA as the default exposure to AI capex, but the more important trade is that its moat is shifting from “best product” to “best ecosystem under pressure.” As hyperscalers keep designing their own silicon, the incremental dollar of AI spend is increasingly bifurcating: generic training/inference workloads still flow to NVDA, while differentiated workloads migrate to lower-cost custom accelerators. That creates a second-order effect where NVDA can keep growing revenue for several quarters even as pricing power slowly compresses, meaning the stock can look fine on top-line beats while margin expectations become the real battleground.

The beneficiaries of this shift are not obvious chip-share rivals, but the infrastructure layers that make heterogeneous AI stacks work. AVGO is the clearest structural winner because custom silicon plus networking plus software increases content-per-rack and makes “non-Nvidia” spend more complex, not less; that tends to lift wallet share even when unit share is contested. AMZN and GOOGL also gain optionality because every custom chip deployed internally reduces dependence on a single supplier and improves their negotiating leverage, but that leverage may not immediately show up in revenue because both still need massive third-party GPU capacity to support customer demand.

The main risk is timing: near-term results are likely to be clean, but the market will trade the guide and commentary, not the quarter. If management acknowledges longer qualification cycles, customer-specific chip wins, or any slowdown in gross-margin expansion, the multiple can compress quickly because NVDA is still priced as a growth-and-margin compounder, not a mature hardware vendor. The contrarian miss is that competition may not cap revenue first; it may cap forward gross margin and free-cash-flow conversion, which matters more for valuation than headline growth over the next 6-12 months.

In short, this is less a “sell NVDA before earnings” setup than a relative-value rotation away from single-name GPU beta into platform-agnostic beneficiaries of AI capex. The cleaner expression is to own the picks-and-shovels winners that benefit from fragmentation, while waiting for any post-earnings de-rating in NVDA to improve entry.

Key Decisions for Investors

• Initiate a relative-value pair: long AVGO / short NVDA into earnings, targeting a 1-3 month horizon. Rationale: AVGO benefits from AI-stack fragmentation and should be more resilient if NVDA margins come under pressure; risk is a blowout NVDA guide that re-rates the entire AI complex.
• Use any post-earnings selloff in NVDA to establish a starter long only after the call, not before. Best entry is on a 5-10% drawdown if gross margin and guide remain intact; upside is a rebound on sustained AI capex, downside is a slower margin-normalization trade if custom silicon adoption accelerates.
• Add AMZN and GOOGL on weakness as indirect AI winners over a 6-12 month window. These names gain strategic leverage from in-house silicon without needing NVDA dislocation to monetize the trend; risk/reward is better than chasing NVDA at a premium multiple.
• Avoid naked short exposure to NVDA ahead of earnings. The near-term catalyst path still favors a positive headline print, so the cleaner short is via relative value or call spreads rather than outright directional bearishness.
• If looking for an options expression, consider NVDA calendar or collar structures around the print to capture elevated event premium while limiting downside if commentary turns margin-cautious.