Prediction: Nvidia Stock Will Fall After Aug. 26. Here Are 2 Reasons Why

On Aug. 26, the otherwise extremely fast-paced Wall Street will slow down and pay close attention as Nvidia (NASDAQ: NVDA) reports its financial results for the second quarter of its fiscal year 2027, which ended on July 26 (Nvidia's fiscal years do not match calendar years). Since the company is at the very center of the artificial intelligence (AI) infrastructure build-out, thanks to its dominance in the GPU (Graphics Processing Unit) market, Nvidia's quarterly updates have become critical to gauging the health of the AI industry and where it might be headed next. Nvidia has outperformed the broader market so far this year, but which way will the stock move post-earnings? My view is that Nvidia's shares are likely to decline. Here are two reasons why.

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1. Wall Street has adjusted its expectations

Even Nvidia's internal projections have constantly underestimated the company's ability to capitalize on the AI boom. Over the past few years, the semiconductor specialist has, as a rule, delivered earnings beats. The market cheered these performances in the early days of the ongoing AI revolution. However, it has become accustomed to them. Now, investors expect Nvidia to beat its own revenue and earnings guidance and analyst estimates, which means that's already baked into the stock price.

That doesn't mean Nvidia's shares can't jump post-earnings, but that would require an extraordinary beat-and-raise quarter. On the other hand, Wall Street will shrug -- at best -- if Nvidia posts revenue and earnings just slightly above expectations. The stock may even decline as a result.

2. A major pre-earnings run-up

Earnings season has shown that the AI boom is still in full swing. Several leaders in the field have posted outstanding financial results. For instance, the hyperscalers -- or leading cloud computing providers -- all saw accelerating cloud sales growth. These are among Nvidia's largest customers, so their results tell us something about how the chipmaker may perform. We can also point to CoreWeave (NASDAQ: CRWV), a company that builds and runs data centers tailored for AI.

CoreWeave buys racks of Nvidia's hardware. So if CoreWeave is performing well and increasing investments in the business, that's a great sign for Nvidia. That seems to be what's happening. CoreWeave's second-quarter results were excellent, with the company's revenue and backlog soaring compared to the year-ago period.

All of this suggests that Nvidia also performed well in its latest quarter, and the market knows it. Nvidia's shares have risen significantly over the past couple of weeks or so -- they are up almost 19% since July 29. As a result, it'll be even harder for Nvidia to impress Wall Street on Aug. 26.

Should you give up on the stock?

Investors should focus on whether Nvidia can perform well over the long run, not whether the company can post strong enough financial results during its upcoming quarter for the stock to experience a post-earnings jump. And there are good reasons to think the tech leader still has a significant runway for growth. AI infrastructure spending doesn't seem to be slowing down much.

That's why many companies in the field are beating expectations. Meanwhile, Nvidia remains the leader in the GPU niche and has expanded into new areas. The agentic AI boom may drive sustained demand for CPUs (Central Processing Units), and Nvidia is poised to capitalize on it, having launched its Vera CPU. That's just one opportunity it could tap into. Beyond supplying the chips that power AI, Nvidia offers a host of other services that allow companies to deploy, run, and manage AI applications effectively.

That puts the company in a strong position to benefit from the industry's continued growth. Now, will Nvidia post the same kind of returns it did during the first couple of years of the AI boom? That's highly unlikely. But the stock can still be an above-average performer over the long term.

Prosper Junior Bakiny has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.