Nvidia is set to report quarterly operating results, with a focus on gross margin. The company’s valuation may be hard to justify, as historical standards suggest it is excessive. The economic impact of AI is projected to reach $15.7 trillion by 2030, highlighting the significance of Nvidia’s role in the AI revolution.

The spotlight will be on Nvidia’s AI-GPUs, which have been in high demand due to persistent scarcity. The company’s gross margin reached 78.4% in the first quarter of fiscal 2025, driven by premium pricing for its hardware. However, competition from other chip producers and internal chip development pose threats to Nvidia’s gross margin.

Nvidia faces challenges in justifying its valuation premium in a historically pricey market. The company’s P/S ratio remains high, signaling potential overvaluation. Past trends show that maintaining extended valuations for industry leaders of emerging technologies is difficult. Nvidia’s growth has been fueled by investor enthusiasm for AI, but any misstep could disrupt this momentum.

Investors should consider historical trends and inflated expectations in evaluating Nvidia’s future performance. The company’s growth has been substantial, but there are concerns about the sustainability of its valuation premium. Nvidia’s position as a market leader in AI technology is solid, but it will need to meet high expectations to maintain its momentum in the long term.

Read more at Nasdaq: Prediction: Nvidia Won’t Be Able to Live Up to Wall Street’s Sky-High Expectations on Aug. 27