NVIDIA's highly anticipated earnings report is about to be released. Will it ignite the AI market in the US stock market?

The highly anticipated financial report of the "AI leader" NVIDIA is about to be released, and Wall Street's expectations are soaring. Investors are heavily betting on the long side, but some analysts have expressed concerns about the overly optimistic sentiment.

After the market closes on Tuesday Eastern Time, NVIDIA will release its third-quarter financial report, and the market is currently very bullish on the financial report. Wall Street analysts predict that NVIDIA's third-quarter sales will be $16.2 billion, with a profit of $7.2 billion. In the same period last year, NVIDIA's sales were $5.9 billion, with a profit of $680 million, an increase of up to 170% or even higher.

Looking at past records, NVIDIA has often lived up to expectations. According to data from FactSet, NVIDIA's performance exceeded expectations in 19 out of the past 20 quarters.

After OpenAI launched ChatGPT and sparked a frenzy in the AI sector, the market sees AI as the next big trend in the technology industry, and NVIDIA is becoming the super winner behind this trend. This is because both tech giants and startups are investing heavily in the development of AI technology, which has driven up demand for NVIDIA chips.

Expectations of good performance have driven NVIDIA's stock price to reach a new closing high of $504.2 per share on Monday, and it has risen for 10 consecutive trading days, setting the longest continuous rise record since 2016. Since the beginning of this year, NVIDIA's stock price has accumulated a rise of about 245%, which is quite impressive compared to the 18% increase in the S&P 500 index. NVIDIA's market value has exceeded $1 trillion.

Data from Vanda Research shows that retail investors have also increased their buying power in the "Big Seven" stocks. The "Big Seven" refers to NVIDIA, Alphabet, Amazon, Apple, Meta, Microsoft, and Tesla.

Not only that, but some investors are also investing through options. According to data from Cboe Global Markets, the hottest trade on Monday was betting on call options for NVIDIA's stock price to rise to $510 or even $550.

Analysts believe that NVIDIA's stock price may continue to rise. In May of this year, after NVIDIA announced quarterly performance and performance guidance that far exceeded expectations, the stock soared by 24% that month, and since then, it has also triggered a sharp rise in the US stock market centered around the AI theme.

Based on the third-quarter data, NVIDIA and Amazon are expected to be the biggest contributors to the profit growth of S&P 500 index component companies. FactSet data shows that without these two companies, the profit growth of the S&P 500 index in the third quarter would only be 1.5%, instead of 4.1%.

Analysts who follow NVIDIA are unanimously bullish on this. According to FactSet data, out of 52 analysts, 49 have given the stock a "buy" or "outperform" rating, while the remaining 3 have given it a "hold" rating. The average target price given by analysts for NVIDIA is $655.6, which means there is still about 30% upside potential compared to the current price.However, the overwhelming bullish sentiment has also raised concerns among some investors. According to media reports citing John Goltermann, Chief Investment Officer of Townsend & Associates, this also means that the market has a low tolerance for errors when it comes to NVIDIA in the long run.