History Says Nvidia Is Likely To Fall on Wednesday. Here's Why That's Not Bad News

Since 2023, Nvidia's (NASDAQ: NVDA) quarterly earnings report has become a main event for investors.

The chip stock has led the AI boom since shortly after the launch of ChatGPT, and the stock is up more than 1,100% since then.

However, while Nvidia has delivered strong growth on the top and bottom lines in the AI era, more recently, the market's response to its earnings reports has been underwhelming. In fact, in the last four quarters, Nvidia stock has fallen on its earnings report, as the chart below shows.

Source: Nvidia financial reports

As you can see from the chart, Nvidia stock has fallen in the first full trading session after each of its last four earnings reports. Nonetheless, the stock has still gained 19% over the last year.

Image source: Nvidia.

Nvidia's earnings reports aren't as meaningful as you might think

In addition to the stock falling post-earnings, even though it's gained over the last year, Nvidia's earnings reports haven't supplied the fireworks that you might expect from the AI bellwether. Trading volume, for example, has only been modestly higher on earnings days than it has been the rest of the year.

Nvidia's results have also been relatively predictable. Over the last four quarters, the surprise, or the variance between the analyst consensus and the result, has ranged between 3.5% and 5.5%.

In other words, Wall Street has a good grasp on the company's performance, and Nvidia has a history of hitting or modestly exceeding its guidance. Notably, the company has beaten earnings estimates in each of its last four quarters, but that hasn't been enough to lift the stock, as high expectations seem already baked in.

What a post-earnings sell-off means for investors

If you own Nvidia stock, you're likely hoping to see it move higher following earnings. That could happen, and I don't think the last four quarters are necessarily predictive of how it will move this quarter.

After all, Nvidia stock is much cheaper than it was a year ago, and revenue growth is set to accelerate for the fourth straight quarter, with the consensus forecast calling for revenue to jump 97% in the second quarter to $92.2 billion.

However, investors should be prepared for the stock to pull back again, though they shouldn't view that as a meaningful event, barring a real surprise in the results, which seems unlikely.

Given its performance over the last year, the strong growth in the business, and the consistent increases in forward estimates from Wall Street, any pullback in the stock should only be seen as a buying opportunity.

Jeremy Bowman has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.