Our experts’ takes on what really drove the mid-week sell-off.
Was it all much ado about nothing?
On Wednesday after market close, I sat in a room with Eric Fry, Luke Lango, and Louis Navellier. Normally, when we are all together, the room is filled with talking (sometimes everyone is talking at the same time).
But on Wednesday, we were all looking at our phones and waiting for one thing.
Nvidia Inc.’s (NVDA) earnings report.
What is normally a routine event had suddenly become the most important data point of the year.
The market has been increasingly wobbly this week as sentiment has started to question whether the AI trade is over-extended.
Everyone in the room thought Nvidia’s earnings would at least be good, and maybe great. But we all wanted to hear the news.
As we were chatting, I checked my computer at 4:30 and there it was – Nvidia’s earnings and guidance had exceeded Wall Street expectations. It felt like the market could let out a sigh, and the bull market could recommence.
The feeling of relief reminded me of the final days of 1999, when people stocked pantries with canned goods, unplugged their electronics, withdrew piles of cash, and braced for the Y2K apocalypse that never came.
For those too young to remember, the Y2K bug was a potential computer problem caused by a programming shortcut in which two digits were used to represent the year (e.g., “99” for 1999) to conserve memory.
As the year 2000 approached, some people predicted that computers would incorrectly interpret “00” as 1900 instead of 2000, potentially leading to failures in critical systems such as banking, utilities, and transportation.
According to a report from a Senate Special Committee on the Year 2000 Technology Problem, the federal government spent approximately $8 billion to prepare for the potential disaster.
Then, at midnight on December 31, nothing happened. Quite literally … nothing.
Everything worked just fine. No planes fell out of the sky. The banks still had all your accounts available. The electricity stayed on.
The world blinked, realized everything still worked – and exhaled.
I was ready to make a comparison today in a piece about investor psychology.
Not so fast.
When are outstanding earnings not enough?
Both NVDA and the broader market seemed to feel the relief from the earnings announcement and started the day hot.
But the market turned mid-morning. The S&P finished the day down 1.5% with Nvidia down more than 3%.
Why the violent reaction?
It feels unwarranted – not only relative to Nvidia’s blowout earnings, but also to the outstanding earnings season that we have just completed.
According to FactSet, the blended net profit margin for the S&P 500 for Q3 2025 is 13.1%, which is above the previous quarter’s net profit margin, above the year-ago net profit margin, and above the 5-year average.
It’s the highest net profit margin in 15 years.
In any other year, a 13.1% net profit margin would have sent markets roaring higher. Instead, it barely bought the market two hours of relief. That disconnect is the story – and why investors felt blindsided
So, what’s going on? Let’s get the expert takes.
In a message to his Growth Investor readers, Louis blamed a constant barrage of attacks from short sellers criticizing circular financing. He flatly rejects their criticism.
The tech industry has always done this [type of financing]. So this is nothing new. And this is how companies maintain monopolies by making alliances and eliminating competition and all that good stuff.
Bloomberg reported on Thursday that NVIDIA’s receivables have risen 89% and are outpacing their sales growth of 62%. So, the fact that receivables are outpacing sales is insinuating that the people buying the Nvidia chips may not be able to afford them.
This is a bogus argument; it’s a receivable. Nvidia is not going to sell chips to people if they don’t get paid. And it’s the most bizarre argument.
So I think this is most unfortunate, but markets react. They don’t think.
Louis believes AI is entering a new growth phase where it won’t just improve productivity – it becomes the engine of productivity.
That’s the foundation of what he calls the Economic Singularity – a period when AI-driven output, innovation and infrastructure begin compounding together and reshaping our entire economy.
The biggest winners of the Economic Singularity won’t just be the obvious AI giants. They’ll be the companies building the essential systems, software and infrastructure behind the entire AI Revolution.
Where there is smoke…?
Luke, our technology investing expert, agrees broadly with Louis’ take. He believes several factors are converging, causing the violent reaction.
Over the last few months, Big Tech has increasingly tapped debt markets to fund its AI expansion. That shift from cash-financing to partially debt-financing introduces risk — because you can default on debt, but you cannot default on cash.
Meanwhile, we’ve seen a series of funky-but-not-necessarily-bad financing dynamics crop up: circular financing loops between OpenAI, Nvidia, AMD, and Anthropic… Sam Altman floating the idea of U.S. government loan guarantees… Michael Burry ranting about GPU depreciation schedules… and now Nvidia’s earnings showing a >50% jump in accounts receivable.
None of this is inherently problematic. But all of it happening at once? It creates smoke — and the market reflexively searches for fire.
Luke reminded his Innovation Investor readers that most of the AI boom is still financed with cash. As for Nvidia, Luke believes the real headline is that the leading chip maker has just posted its first revenue growth acceleration since late 2023, with faster growth projected for the next quarter.
Luke is tracking a new facet of the AI wealth cycle that’s minting millionaires faster than any tech boom in history.
That’s why he recently traveled to Silicon Valley to unveil the “Hyperscale Revolution,” all about the digital-first companies using AI to scale without factories, inventory, or limits.
And he highlights one small, overlooked stock that could become the next Amazon… in a completely unexpected sector.
Watch his latest briefing and see how to position yourself.
If you’re looking for alternatives
For a contrary view, global macro investing expert Eric Fry was ready with a hard dose of market reality.
Nvidia’s numbers weren’t just good, they were fantastic! Revenue, profits, guidance… all exceeded what Wall Street had modeled.
What does it mean when perfect is no longer good enough?
In his Smart Money column, Eric argues that NVDA’s earnings didn’t silence the bearish narrative… they validated it. A market that can’t celebrate excellence is a market priced for perfection. And perfection is impossible to sustain — even for Nvidia.
In Eric’s view, investors aren’t wrong to believe in AI. They’re wrong to believe it can justify endlessly rising stock prices without interruption. Nvidia’s quarter didn’t end the doubt. It amplified it.
Here is Eric’s take for where investors should be looking instead.
While everyone obsesses over Nvidia and its AI chips, they’re missing the one component that makes everything work. Without it, even the most powerful AI chip is just expensive silicon.
At Fry’s Investment Report, I’ve been following a particular under-the-radar company that makes this vital component in AI data centers, allowing servers to communicate and learn from each other.
While Nvidia is up over 30% year-to-date, this company more than doubled that gain with a year-to-date climb of nearly 70%. And it’s currently up 110% since I recommended it to the paid members of Fry’s Investment Report.
You can click here to learn how to access Eric’s “Sell This, Buy That” recommendations.
During times of market turmoil, it’s essential to maintain a long-term perspective. Stocks have provided outstanding gains over the last century.
Market volatility isn’t a sign the bull market is over. It’s the price of admission.
Enjoy your weekend,
Luis Hernandez
Editor in Chief, InvestorPlace
