No more lurking in the shadows, no more chipping away beneath the surface, no more all-time highs at the index level…

The market correction is showing its face.

Today, the S&P 500 broke to new lows, undercutting a six-month trendline as momentum fades to levels not seen since April.

Investors are nervous, and sentiment is down in the dumps. We’re living in a world where Andrew Ross Sorkin’s book about the 1929 stock market crash tops Amazon’s bestseller list for finance books. (I heard it’s good!)

That’s the vibe just as sellers begin to throw their weight around.

I hate to say it, but the selling pressure hitting the stock market will only intensify when Nvidia (NVDA) unofficially closes the door on earnings season tomorrow night.

Let me explain…

It’ll Never Be Good Enough

Spectacular, show-stopping results simply will not do.

This season, the slightest sign of weakness (or perceived weakness) has justified ditching a company’s stock.

Palantir (PLTR) immediately comes to mind. It reported gangbuster earnings and raised its forward guidance, yet the initial reaction drove PLTR shares 7% lower.

Other non-AI companies have fallen despite beating top and bottom-line estimates. Shopify (SHOP), Spotify (SPOT), and crypto miner HUT 8 (HUT) all dropped on solid numbers.

Exceptional earnings met with adverse reactions: That’s the obstacle that lies ahead of Nvidia, and by extension, the broader market.

Past Reactions

Nvidia may be one of the greatest companies in the world. It may revolutionize technology and our future in unforeseen ways.

However, we’re not living in a fantastical future. No, we’re stuck in this hot mess called the present.

The chipmaker now accounts for 14% of the Nasdaq 100 and 7% of the S&P 500, so any downside in Nvidia will weigh heavily on the broader stock market.

Its market capitalization reached the $5 trillion mark last month as Nvidia continues to grow at a breakneck pace. Unsurprisingly, shares are trading at 53x earnings.

I know, I know, it’s a far cry from PLTR’s 535x earnings. But this is still twice the markup META shares garner.

It seems high. Then again, most tech companies may trade at 100x earnings someday.

On top of all that, Nvidia shares haven’t fared well following recent earnings reports. Here’s how the stock reacted to the past four announcements:

• Reported Nov. 20, 2024 – down -9% five days later
• Reported Feb. 26, 2025 – down -10% five days later
• Reported May 28, 2025 – up 4% five days later
• Reported Aug. 27, 2025 – down -5% five days later

Unsurprisingly, the semiconductor company crushed earnings for all of the above quarters and has exceeded annual estimates since 2021.

No matter how impressive Nvidia’s Q3 results turn out to be, investors tend to fade the call.

Wednesday night will likely be no different, especially as investors won’t need to look far to find faults in the share price.

The Naysayers

Peter Thiel is out. Michael Burry is short.

Thiel’s hedge fund exited its entire Nvidia position last month, just as Michael Burry grabbed the mic.

Burry, the famed hedge fund manager who foresaw and profited from the subprime mortgage crisis, has become increasingly vocal over the past couple of weeks.

He’s raising concerns about hyperscalers (companies that run data centers and provide cloud services, such as Meta, Oracle, Microsoft, Amazon, and Google), and their exponential increase in Capex.

He’s not alone. Large financial institutions are also heeding caution.

Bloomberg reports that big banks are buying single-company credit default swaps (derivatives that pay out if a company defaults on its debt). They’re essentially the same type of asset Burry utilized to bet on the subprime mortgage collapse that led to the global financial crisis.

Oracle’s derivative swaps on company debt are making headlines after prices more than doubled over the past month. And for the first time, credit default swaps for Meta Platforms have begun trading.

(Comically, many of the institutions buying the default swaps are the banks that issued the credit to hyperscalers.) 

Here’s the catch: Hyperscalers are using a large part of Capex to buy Nvidia chips so they can expand data centers and boost GPUs.

I understand that demand for Nvidia’s AI chips will dwindle if and when the hyperscalers fall on hard times. But the potential future in which AI stocks crash the market like it was 2001 (or even worse, 1929) does not exist, at least not yet.

What does exist is an incredible demand for Nvidia chips — a reality that unfortunately doesn’t stand a chance against investor perceptions and emotions.

What’s the Story?

Ok, so let’s say the market correction sticks its head out, things get ugly Wednesday night, and then deteriorate into Thursday morning.

I’m racking my brain for the narrative that will diffuse this situation – a story that will soothe market jitters like a weighted blanket.

An overwhelming consensus of a rate cut next month may do the trick. On the other hand, the conclusion to the government shutdown certainly didn’t do much for the bull case. 

I expect Nvidia’s numbers to make a splash. Unfortunately, it will likely lead to falling prices that drag the indexes lower.

Skittish hands hover just above the sell button. Thiel is out. Burry is short. And the news cycle need not grasp for AI doom-and-gloom headlines.

Plus, stellar earnings calls have led to lackluster reactions, and NVDA’s share price often drops following an earnings announcement anyway.