Earnings season serves as 'wake up call' for AI skeptics ahead of Nvidia's report: Wedbush

Wedbush says Nvidia's first-quarter 2026 earnings report next week could act as another catalyst for the tech sector, framing the current earnings season as a wake-up call for AI skeptics. The note is positive for AI and tech sentiment, but it contains no new financial results or guidance figures. Market impact is likely limited to sentiment and positioning rather than a direct price driver.

Analysis

The setup is less about one earnings print and more about whether NVDA can re-accelerate the entire AI capex stack after a period of skepticism. If guidance validates still-tight demand, the first-order winner is NVDA, but the second-order winners are the picks-and-shovels names tied to rack-scale deployment: networking, optics, power, and foundry capacity. That matters because the market has increasingly treated AI as a software monetization story; a strong print would reassert that the next 2-4 quarters are still a physical infrastructure cycle, not just a sentiment trade.

The risk is that expectations are now high enough that a “good” quarter may not be enough if shipment timing or gross margin commentary suggests digestion into the next quarter. In that case, the downside wouldn’t be confined to NVDA; it would likely hit high-beta AI proxies first, especially names that have rerated on multiple expansion rather than durable earnings revision. Watch for a shift in the message around lead times and hyperscaler buying patterns — if customers are optimizing spend rather than expanding budgets, the AI trade can compress quickly over days even if the long-term theme remains intact.

Contrarian-wise, the market may be underestimating how much of the upside is already embedded in the obvious beneficiaries and overestimating how binary the print is for the broader tech tape. A strong report could actually be a sell-the-news event for crowded AI longs if it fails to expand the forward path enough to justify current multiples. The better trade may be to own the infrastructure layer with cleaner earnings power while fading the most crowded single-name expressions where positioning is most stretched.

Key Decisions for Investors

• Long NVDA into earnings only via defined-risk upside structures: buy 1-2 week call spreads into the print if implied vol is still below the expected move; target a 1.5-2.5x payout if guidance re-accelerates and take profits into the gap.
• Pair trade: long ANET or AVGO vs short a basket of high-multiple AI software/overlay names for 1-3 months. Rationale: if NVDA confirms capex durability, the market should reward infrastructure enablers more than duration-sensitive multiples.
• Use any post-earnings pullback in NVDA to add on a 2-6 week horizon only if the reaction is driven by profit-taking rather than guide deterioration; risk/reward improves materially if the stock resets 5-8% on strong fundamentals.
• Short-dated hedge: buy put spreads on the most crowded AI beta names into the print as a hedge against a sell-the-news reaction. Best use is as a 1-week event hedge with capped downside.
• If earnings surprise is strong and breadth improves, rotate exposure from pure AI momentum into semis and networking for the next 1-2 quarters; the trade should work even if NVDA itself stalls because the market will likely broaden leadership.