reports earnings on Wednesday, and for a lot of traders that is the entire AI story. The stock is up about 41 percent this year, still near all-time highs. The Magnificent Seven have carried the indexes. If you are like many active traders, a third or more of your portfolio is tied up in AI and mega cap tech.
The headline numbers from Nvidia will matter, but what happens on that call will not be the only factor. Three quieter signals in the background are already shifting. Together they tell you whether this is just another strong quarter, or the moment when the AI trade moves from easy mode into something much less forgiving.
This article walks through those three red flags, how this week’s Nvidia call fits into them, and what to do with your AI exposure when they start to move.
Red Flag #1: The VC Down-Round Wall
The first signal is showing up where the AI boom started: in venture-backed startups.
PitchBook data says down rounds have hit 15.9% of VC-backed deals in 2025 so far, a 10-year high. Almost a third of those deals, 29.3%, are in AI and machine learning companies. That’s a lot of repricing in a part of the market that’s supposed to be the future demand engine for GPUs and cloud.
The micro picture looks just as stretched. Series A AI companies are spending about $5 for every $1 of revenue they generate, roughly twice the rate of earlier cohorts. The median Series A AI company now reaches $100 million in cumulative burn in about three years instead of six. Bain & Company estimates the AI sector needs around $2 trillion in annual revenue by 2030 to justify current investment levels. Today, AI and machine learning revenue still lives in the tens of billions.
Put those pieces together and you get a funding wall. As VC
Nvidia Earnings: 3 Red Flags the AI Trade Is Topping
