Nvidia's Strong Q2 Results Highlight Continued AI Dominance Despite Challenges

Wall Street is nitpicking Nvidia's beat and raise. We are not. Here's why.

Shares of Nvidia were under modest pressure Thursday, despite the company reporting an overall strong quarter with guidance that came in ahead of expectations. Clearly, some investors are finding issues within the report. While we think those concerns are misguided, here are three nitpicks generating the most noise on Wall Street. Data Center revenue missing expectations Inventory increasing by roughly 33% sequentially Customer concentration 1. Data center revenue 'miss' While data center results did technically miss the consensus FactSet estimate, we were not that concerned. In our Nvidia earnings analysis Wednesday evening, we talked about seeing clear signs of sustained strong demand. We also got the sense from the post-earnings conference call that Nvidia simply wasn't able to ship as much as they would have liked to due to capacity constraints. Nonetheless, we decided to do a little more digging into the numbers that made up the consensus estimate. Out of 24 firms covering Nvidia, we found that one of them, with a sell rating and $100 price target, provided what we think amounts to an outlier on the upside. The firm in question, Seaport Research, provided FactSet with a data center estimate of $47.29 billion, $4 billion higher than the second-highest estimate. This one estimate added $258.6 million to the overall consensus. In other words, if we stick with the other 23 estimates -- ranging from $39.7 billion to $43.08 billion -- the consensus estimate drops to $41.084 billion, only slightly below the result $41.096 billion that Nvidia delivered. Rounding that, it's really a match. In its earnings reaction note, Seaport remains worried about data center revenue and reiterates its sell rating and price target. Some might argue we should also remove the lowest estimate if we're removing the highest. However, we don't think that is necessary, given that the lowest estimate does not amount to an outlier. The bottom four estimates range from $39.7 billion to $40.09 billion -- so it was not uniquely low, whereas the highest estimate was, indeed, uniquely high. 2. Inventory build-up The inventory concern was really odd. The bearish argument: The company is sitting on old inventory that it simply can't offload. If you think that's the case here, then we wonder which conference call you were listening to. The bullish argument, which we think is the only one that makes sense given the commentary on the call, is that inventory is being built up to meet what the company believes will be high demand -- build inventory so that you don't lose out on sales due to a lack of product. Indeed, Nvidia noted on the earnings release, "Inventory was $15 billion, up from $11.3 billion sequentially, to support the ramp of Blackwell Ultra." The idea that some may be looking at this as a negative is perplexing, to say the least. The positive price action in the semiconductor cohort more broadly also supports the argument that the build is in anticipation of demand, and should therefore be viewed bullishly. Otherwise, chip-focused exchange-traded funds such as the VanEck Semiconductor ETF would be lower on the day, especially since Nvidia carries the most weight in that fund. Investors are not buying these other names because they think customers are rotating to them and away from Nvidia. They are being bought because Nvidia just said that demand is strong and likely to sustain well into next year and through to the end of the decade as the global compute infrastructure is refreshed for the age of artificial intelligence. 3. Customer concentration Is Nvidia too reliant on a handful of deep-pocketed customers buying its chips for data centers? That's not a new debate, but it is once again surfacing in the just-reported fiscal 2026 second quarter, which ended July 27. In its quarterly securities filing, Nvidia disclosed that three direct customers accounted for a combined 56% of its accounts receivables balance at the end of the July quarter -- basically, this is the money that its customers still owe the company. The companies aren't named, but the percentages given for each were 23%, 19% and 14%, respectively. That is actually a pinch below the prior April quarter, when Nvidia said three customers totaled 57% of the balance combined, based on 27%, 18% and 12%, respectively. To be sure, both quarters represented an increase compared with Nvidia's filing at the end of last fiscal year, when the company only had two customers that exceeded 10% of revenue -- a threshold that requires disclosure under accounting rules. At that time, Nvidia said two customers represented 17% and 16% of its accounts receivable balance, equal to 33%. . In general, investors look at customer concentration as being risky -- consider a hypothetical smartphone component supplier that derives 75% of its revenue from one manufacturer. If that manufacturer takes its business elsewhere, the supplier could be in trouble, at least in the near term, until it figures out a new plan. We view Nvidia's situation differently for a few reasons. For starters, the cloud-computing providers like fellow Club name Microsoft are among the biggest spenders on its technology -- even if we don't know for certain which companies these three big Nvidia customers are. While these cloud providers are spending billions of their own dollars on the chips and networking gear, they're turning around and renting a lot of that computing power to tons of other customers. That's more comforting to us than it would be if Microsoft were buying all these chips for itself. Now, layer in the fact that the cloud providers frequently say that they have more demand for their AI services than capacity, and it makes sense why they're trying to get their hands on all the computing power they can. Additionally, as Jim Cramer put it Thursday morning: "There are probably seven or eight customers that would like to be" accounting for a larger share of Nvidia's orders. "Sovereign AI could be really big, but you don't just say I'm going to shaft Azure and give it to Iceland." Even with that dynamic being at play, Nvidia's business catering to so-called sovereign AI is growing, adding a new kind of customer to its revenue stream at the same time these unnamed three tech giants are gobbling up chips. Sovereign AI, a term Nvidia has popularized, refers to nations building and controlling their own computing infrastructure so they can develop AI applications in their native languages, utilizing their own data. "We are on track to achieve over $20 billion in sovereign AI revenue this year, more than double that of last year," CFO Colette Kress said on Wednesday night's conference call. Among the reasons to like this business for Nvidia is that countries are their own kind of deep-pocketed customer with less immediate pressure to show a financial return. As Nvidia's manufacturing capacity at Taiwan Semiconductor Manufacturing Co. grows, perhaps the company is able to divert more chips to these Sovereign AI customers without sacrificing supply for the likes of Azure. Taiwan Semi is Nvidia's main manufacturing partner. Nvidia designs its chips and hardware, but does not have factories, or foundries as they are called in the chip industry. (Jim Cramer's Charitable Trust is long NVDA, MSFT. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

There are still four Wall Street bears left on Nvidia. Here's what they are saying about results

Some analysts weren't satisfied with Nvidia's latest quarterly figures. The graphics processing unit manufacturer posted second-quarter adjusted earnings of $1.05 per share, beating the $1.01 per share analysts polled by LSEG had estimated. Nvidia's $46.74 billion revenue also beat expectations of $46.06 billion and marked a 56% increase in the quarter from $30.04 billion a year ago. However, shares of Nvidia fell as much as 5% overnight after its data center revenue came up short of expectations for the second quarter in a row. The last quarter also marked Nvidia's slowest period of growth since mid-2023, when the AI trade was in full swing. Most analysts covering the stock remained bullish despite the slight data center blemish -- as the company's overall third-quarter revenue guidance did not include potential sales in China. Factoring those in, Nvidia's top line could get a $2 billion-$5 billion boost in Q3 . Many even raised their price targets on the stock. Still, Seaport Research Partners, D.A. Davidson, Deutsche Bank and HSBC were cautious. Seaport kept its sell rating on shares, while the latter three reiterated hold-equivalent ratings. Here's what they had to say about Nvidia's latest earnings. Seaport Research Partners: Sell rating, $100 price target The investment firm's price target implies the risk of 45% downside ahead, based on Nvidia's Wednesday closing price of $181.60 per share. "Nvidia printed a set of largely in-line results. The Blackwell ramp is underway and is progressing in-line with expectations, but as we have noted, there seems to be little scope for upside this year. Sales to the PRC [People's Republic of China] remain a swing factor as the company awaits approval to ship there. We remain cautious on the company's near term outlook and broader concerns about the industry's ability to digest the massive AI investments this year," the firm said. Deutsche Bank: Hold rating, $180 price target Deutsche's price target, raised from $155, implies shares will be little changed over the coming year. "Overall, we believe that NVDA remains the technology leader in enabling AI, with expectations for powerful revenue growth underscored by continued and diversifying demand within a rapidly growing TAM. While the company did not include China revenue in its guidance, we believe they could likely benefit from such sales within CY26 and have therefore included this resumption in our out year estimates ... Based on these higher estimates and a consistent P/E multiple of 27x, our P/T rises to $180, with our view of NVDA's dominance remaining unchanged, but fairly valued," the bank said. D.A. Davidson: Neutral rating, $195 price target The investment firm raised its price target to $195 per share from $135, indicating upside potential of 7%. "We maintain our NEUTRAL rating and raise our price target to $195 from $135 on NVIDIA following mixed 2Q26 results with data center revenue coming in slightly lower than expected, and sentiment surrounding the quarter largely being driven by continued concern around the company's ability to sell H20s into China. That being said, our work around AI models, particularly on the algorithmic side, are leading us to increasingly believe that demand for compute is unlikely to subside in the foreseeable future, given trends we're seeing in pre-training, post-training, and inference," D.A. Davidson said. HSBC: Hold rating, $200 price target HSBC's forecast is roughly 10% above Nvidia's current valuation. "We raise our FY26 EPS estimate by 3% to reflect slightly better margin expectations but keep FY27 estimates largely unchanged. Our TP of USD200 is based on an unchanged target FY27 PE of 31x and implies c10% upside. We maintain our Hold rating as we expect the near-term supply inconsistency and China uncertainty to remain an overhang. To turn more bullish, we would need to see further upward revision for 2026 CSP capex," the firm said. -- CNBC's Kif Leswing contributed to this report.

Nvidia's $46.7 Billion Quarter Shows the AI Trade Is Alive and Well -- With Caveats

Patrick Sanders is a contributing Motley Fool stock market analyst covering stocks and ETFs in the consumer, financial, and technology sectors. Before joining The Motley Fool, he was an assistant managing editor at U.S. News & World Report and a news editor for The Associated Press. He holds a bachelor's degree in journalism from Marshall University. Investors are used to seeing Wall Street jump up and down every time Nvidia (NVDA 0.01%) reports its quarterly numbers. As demand for its graphics processing units (GPUs) continues to grow, to power artificial intelligence (AI) and machine learning applications, Nvidia has grown dramatically in recent years, becoming the biggest publicly traded company in the world with a market capitalization of $4.4 trillion. However, that reaction didn't happen after Wednesday's report. Nvidia announced strong numbers, with revenue up 56% from a year ago, but investors paused. The stock actually dropped 3% in after-hours trading and was still in the red nearly 24 hours after the report landed. Clearly, investors didn't get what they wanted when the chipmaker released its earnings. But I have a different take: I think the report shows that the AI space is still growing and still ripe for the picking. And that's even if one of Nvidia's biggest markets stays dark. Nvidia's earnings report and the China issue There's a lot to like about Nvidia's report for its fiscal 2026 second quarter (ending July 27). Revenue was up 56% to $46.7 billion. The data center segment led the charge with revenue of $41.1 billion. That's also an increase of 56% from the previous year. Net income was $26.4 billion, up 59% from the prior-year quarter, when it was $16.6 billion. Earnings per share (EPS) were $1.08, up 61% from last year's $0.76. The company accomplished all this despite the fact that it was completely shut out from selling its H20 chips in China. The chips are made specifically for the Chinese market to comply with U.S. export restrictions against advanced AI semiconductors. The H20 is less advanced than its flagship Hopper H100 chips but can run some AI workloads 20% faster despite their lower power. The U.S. blocked H20 exports in the spring, leading Nvidia to take a $4.5 billion inventory charge. Earlier this summer, the company disclosed that it had a deal with the U.S. to resume sales in exchange for 15% of revenue from those sales, but it said Wednesday that the deal has not been finalized. Management said it was able to sell $620 million in H20 chips to a customer outside of China and benefited from a $180 million release of previously reserved H20 inventory, but data center revenue fell 1% on a sequential basis. If the restrictions are eased, the company said, it could ship between $2 billion and $5 billion in H20 chips in the third quarter. The future lies with Blackwell Nvidia's H100 chips are the flagship right now. But the company's Blackwell line is the future, and it's a big reason investors should be excited. The Blackwell chips deliver up to five times the AI performance of Nvidia's Hopper chips, while at the same time using much less energy. That's important to customers with huge data centers. And the company is already reaping rewards. It said Blackwell sales jumped 17% from the first quarter. CEO Jensen Huang said, "Blackwell is the AI platform the world has been waiting for, delivering an exceptional generational leap -- production of Blackwell Ultra is ramping at full speed, and demand is extraordinary." The company said it has already signed several major companies to use its Blackwell line, including Walt Disney, Foxconn Technology, Hitachi, Eli Lilly, and Taiwan Semiconductor Manufacturing. It is also building Blackwell AI infrastructure in France, Germany, Spain, Italy, and the U.K. How to invest in Nvidia today When you're looking at Nvidia stock, one of the major questions to consider is China. What will happen if the company is shut out of that market for the long term? China sales made up 13% of revenue last year, coming in at $17.1 billion. Yes, that's a possibility. The trade war between Washington and Beijing isn't going to go away. Even if the Trump administration finally inks a deal with Nvidia to forgo the export licenses for a 15% cut off the top, Beijing has to be OK with it as well. And right now, Chinese regulators are concerned that the chips could pose a security risk if there's a back door that would allow them to be operated remotely (a claim that Nvidia rejects). But consider Wednesday's report. Even without sales in China, revenue made a huge jump in the quarter: 56%. And there's plenty of reason to believe that those sales are going to continue, according to Dan Ives, a Wedbush Securities analyst and one of the world's top technology company analysts. Speaking to Bloomberg TV on Thursday, Ives said that Nvidia's results prove the AI boom is just beginning: "I mean, if you look at these numbers, especially when you factor in where China's going to be, I mean, Jensen [Huang] talked about $50 billion, 50%-type growth number. This just shows the next stage of adoption is actually just starting." I think he's right. With or without China, Nvidia's Blackwell line is going to be huge for the company, giving it fuel for revenue to continue to increase and for its shares to climb even higher. I'm more convinced than ever that this will be a $5 trillion company, perhaps before the end of the year.

Why Nvidia's Post-Earnings Sell-off Is a Gift for Smart Investors

George Budwell has positions in Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Meta Platforms, Nvidia, and Tesla. The Motley Fool has a disclosure policy. Nvidia (NVDA 0.01%) shares fell roughly 2% following its fiscal 2026 second-quarter earnings release on Wednesday despite delivering revenue of $46.7 billion that beat guidance of $45 billion and issuing Q3 guidance of $54 billion. Wall Street's muted reaction reflects unrealistic expectations for a company that has consistently outperformed. However, this pessimism creates an opportunity for investors who understand the bigger picture unfolding across the artificial intelligence (AI) landscape. Nvidia reported fiscal Q2 revenue of $46.7 billion, up 56% year over year, beating guidance of $45 billion. Q3 guidance of $54 billion represents 54% year-over-year growth. These figures exclude any H20 product revenue from China, yet growth remains robust. The company's data center business continues driving growth. Underscoring this point, revenue from the new Blackwell products came in at a staggering $11 billion in fiscal Q4 2025, exceeding management expectations and signaling stronger-than-anticipated demand for next-generation AI infrastructure. Wall Street thinks the China restrictions hurt Nvidia, but they've actually created opportunities with leading U.S. cloud customers. The new Blackwell rollout and strong demand from domestic hyperscalers reduce geopolitical risk while maintaining robust growth. Leading U.S. cloud customers have absorbed capacity that would have gone to China, often improving the company's customer-quality mix. This geographic shift has actually improved Nvidia's customer quality. Instead of dealing with geopolitically sensitive Chinese buyers, the company now focuses on cash-rich American hyperscalers with multiyear AI infrastructure commitments worth hundreds of billions of dollars. Nvidia's true competitive advantage isn't its hardware -- it's the Compute Unified Device Architecture (CUDA) software ecosystem that underpins most leading AI models and creates significant switching costs. Models like OpenAI's GPT series and Meta's Llama architecture were built using CUDA tools and frameworks. This creates massive switching costs for any organization that has invested years in training engineers on CUDA development. Even if competitors like Advanced Micro Devices developed comparable chips tomorrow, migrating existing AI models would require months of engineering work and risk introducing performance degradations. The company has systematically expanded this moat through strategic acquisitions, such as the $6.9 billion purchase of Mellanox Technologies in 2020. This networking expertise allows Nvidia to offer complete rack-scale solutions rather than individual components, making it even harder for customers to mix and match alternatives. Consider the economics: When Tesla trains its Full Self-Driving neural networks or when OpenAI develops new language models, they're not just buying Nvidia chips -- they're buying into an entire development ecosystem. Switching would mean retraining thousands of engineers and potentially rebuilding years of AI development work. The real catalyst lies in Nvidia's next-generation Blackwell architecture, which processes AI workloads with dramatically improved efficiency, while commanding higher prices. Conservative models put data center revenue near $257 billion by fiscal 2027, a roughly 41% compound annual growth rate, representing substantial growth from current levels. Each gigawatt-sized data center represents approximately a $50 billion infrastructure opportunity, and Nvidia has captured about one-third of cumulative data center capital expenditures to date. With dozens of these facilities planned across the globe, the addressable market continues expanding. The company's gross margins tell the story of pricing power. Margins are forecast to dip temporarily as Blackwell ramps, then recover to the mid-70% range exiting fiscal 2026 -- levels that would make most software companies envious. Nvidia is developing the infrastructure backbone of the AI revolution. This comprehensive approach means customers aren't just buying chips -- they're investing in a platform that reduces development time and maximizes performance. As a result, this 2% post-earnings decline scans as an attractive entry point for investors seeking exposure to the AI revolution. After all, Nvidia continues delivering outsized growth while building an increasingly unassailable moat around the most important technological innovation in human history.

Prediction: This Supercharged Growth Stock Will Soar to $10 Trillion by 2030 | The Motley Fool

This artificial intelligence (AI) pioneer is riding gale-force secular tailwinds that will take it to the next level. The popular narrative over the past few months is that demand for artificial intelligence (AI) is slowing, but the truth is much more nuanced. Faced with tough comps, some of the biggest players and early beneficiaries are experiencing decelerating growth rates, but the numbers are still off the charts in absolute terms. Take Nvidia (NVDA -3.38%), for example. The company pioneered the graphics processing units (GPUs) that quickly became the foundation upon which AI training and inference are built. Demand remains strong for these AI-centric chips, but relative growth rate has slowed. When the company reported its recent financial results, investors gave a collective shrug. However, putting the results in context reveals that Nvidia is on the fast track to earn a charter membership in the $10 trillion club. Let's take a look at the company's results and how it gets there from here. Nvidia stock has been a windfall for patient investors. Those who bought in after the company's initial public offering (IPO) in early 1999 have notched total returns of 482,600%. Put another way, a $100 investment made 26 years ago is now worth $482,600 (as of this writing). Some investors may dismiss this as ancient history, but consider this: Over the past 10 years, the stock has gained 31,770%. That same $100 investment made a decade ago would be worth $32,110 (including dividends). Much of its growth in recent years has been fueled by the broad adoption of AI. During Nvidia's fiscal 2026 second quarter (ended July 27), the company delivered record-setting revenue that grew 56% year over year to $46.7 billion. This fueled adjusted earnings per share (EPS) of $1.05, which jumped 54%. Driving the results was a superb performance by the company's data center segment, which includes processors used for AI, data centers, and cloud computing. Revenue for the segment jumped 56% to $41.1 billion, almost entirely the result of demand for AI. Bears will point to the 56% growth rate as a sign of impending doom. After all, it wasn't long ago that Nvidia was putting up year-over-year growth rates north of 100%. Again, some context is in order. For the coming quarter, Nvidia is guiding for quarterly revenue of $54 billion, which is double what the company made in all of fiscal 2023. That's hardly a death knell. There could be much more to come. CEO Jensen Huang said, "We see $3 trillion to $4 trillion in AI infrastructure spend by the end of the decade." As the principal supplier of the chips that underpin AI technology, the company is well-positioned to profit from this trend. Nvidia currently boasts a market cap of roughly $4.4 trillion (as of this writing). This means it will take stock price gains of 127% to drive its value to $10 trillion. According to Wall Street, Nvidia is on track to generate revenue of roughly $206 billion in fiscal 2026, resulting in a forward price-to-sales (P/S) ratio of 21. Assuming its P/S remains constant, Nvidia would need to grow its revenue to roughly $466 billion annually to support a $10 trillion market cap. Wall Street is forecasting annual revenue growth of 23.6% for Nvidia over the coming five years. If the company can achieve that growth rate, it could reach a $10 trillion market cap as early as 2030. But don't take my word for it. Ben Reitzes, managing director and head of tech at Melius Research, has run the numbers and believes that Nvidia can generate revenue of $600 billion annually by the end of the decade, predicting its stock will "double from here, if not more." He cites opportunities with emerging AI companies, data centers (beyond its current hyperscale customers), and sovereign AI as fueling Nvidia's growth between now and 2030. Given the rapidly evolving AI landscape, I think Reitzes' premise is spot on. It's important to remember that one of the biggest obstacles to life-changing gains in a stock like Nvidia is the volatility that is part of the price of admission. Its stratospheric rise in recent years has attracted plenty of fair-weather investors, many of whom will jump ship at the first signs of trouble, leading to even greater volatility. Any hint of slowing sales, and Nvidia stock could fall precipitously. On the bright side, investors with a five-to-10-year time horizon are less to be fazed by these movements. Finally, Nvidia stock is currently selling for roughly 30 times next year's earnings. While some will point out that it's priced at a premium, I'd argue it's an attractive price for a company poised to generate double-digit sales and profit growth through the end of the decade.

Nvidia: As Growth Continues to Soar, Should Investors Keep Piling into the Stock? | The Motley Fool

Nvidia once again demonstrated why it is the dominant player in artificial intelligence (AI) when it reported its Q2 results. Nvidia (NVDA -3.38%) continued its breakneck growth in its second quarter (ended July 27), as demand for its graphics processing units (GPUs) remains voracious. The strong growth came despite the company not selling any chips to Chinese-based customers during the quarter. While Nvidia's stock did not make a big move on its earnings announcement, it is up about 35% on the year, as of this writing, and up more than 1,300% over the past five years. Let's take a closer look at Nvidia's results and prospects to see whether investors can continue to pile into the stock. Nvidia's quarter once again demonstrated that the artificial intelligence (AI) infrastructure build-out continues to march along. The company's revenue surged 56% to $46.74 billion, topping analyst estimates for sales of $46.06 billion, as compiled by LSEG. Adjusted EPS, meanwhile, increased 52% to $1.05, topping the $1.01 consensus. What makes the growth even more impressive is that Nvidia missed out on around $8 billion in revenue from China if it had been allowed to continue to sell its H20 chip in the country. Instead, the company took a $4.5 billion inventory write-down. It estimates that the Chinese market is a $50 billion opportunity that is growing 50% a year. Nvidia is expecting to be able to obtain an export license from the U.S. government to begin selling the chip to Chinese customers once again, but it did not include any Chinese sales in its guidance. The U.S. government is looking to take 15% of the revenue generated from any H20 sales to Chinese customers, although it has not yet enacted this measure. Meanwhile, Nvidia continues to push to be allowed to sell its newest Blackwell chips to China, not just the "dumbed-down" H20 chips. Data center revenue once again was the biggest contributor for Nvidia, with revenue climbing 56% to $41.1 billion. Incredibly, that's up from just $10.3 billion two years ago. Nvidia's GPUs continue to be its main product, and its newest Blackwell chips accounted for tens of billions of revenue. However, within the data center segment, its networking portfolio also shone. Data center networking equipment revenue nearly doubled to $7.3 billion due to strong demand for its Spectrum-X Ethernet, InfiniBand, and NVLink products. With AI inference eventually expected to overtake the market for training large language models (LLMs), Nvidia highlighted its strength in this area, saying Blackwell set the benchmark for inference performance. It also highlighted how agentic AI needs much more computing power than generative AI for both training and inference. As a result, it sees AI infrastructure growing to be a $3 billion to $4 trillion opportunity in the next five years. Nvidia's other segments were also strong. Gaming revenue soared 49% to $4.3 billion, while its professional visualization segment saw sales climb 32%. Meanwhile, its burgeoning automotive segment saw revenue surge 69% to $586 million. The company credited its strong auto performance to self-driving solutions, while saying its new Drive AV software platform will give it billions of dollars in new revenue opportunities. The company also continues to generate a prolific amount of cash, with operating cash flow of $15.4 billion and free cash flow of $13.5 billion in the quarter. It ended the quarter with net cash and marketable securities of $56.8 billion and $8.5 billion in debt. Looking ahead, Nvidia forecast Q3 revenue to come in around $54 billion. While no Chinese sales were included in the guidance, the company said it could ship between $2 billion and $5 billion worth of H20 chips in the quarter if the market opens up. Nvidia's growth continues to be eye-popping for a company of its size. While China was a big headwind in the quarter, it barely slowed down its momentum. Meanwhile, there is the possibility that this huge market could open up later this year. AI infrastructure spending continues to soar, and given the announced capital expenditure (capex) budgets from the major cloud computing providers and other AI companies, there appear to be no signs of this spending slowing down. With Nvidia predicting the data center market growing to between $3 trillion to $4 trillion in the next five years, there is still a massive opportunity for the company moving forward. Meanwhile, the strength of Nvidia's networking portfolio doesn't get nearly the press it deserves, as it's growing rapidly and is another one of the company's big advantages, in addition to its CUDA software platform. The stock still looks attractively valued, trading at a forward price-to-earnings (P/E) ratio of 29.5 times 2026 analyst estimates, and a PEG (price/earnings-to-growth) ratio of less than 0.8, with PEGs below 1 considered undervalued. With AI infrastructure spending still growing strongly and the company's wide moat, Nvidia is still a stock to buy at current levels.

Nvidia's Jensen Huang Calls the AI Opportunity "Immense." Here's What Could Happen Next.

Enjoy 0% intro APR on purchases and balance transfers for 15 months -- plus up to 5% cash back in popular categories. Nvidia's (NVDA 0.01%) great successes of the past few years actually have prompted investors to worry in recent times. They've asked themselves the following question: Are the stock's best days behind it? The artificial intelligence (AI) powerhouse has seen revenue soar in the triple digits in past quarters, and the stock price has taken off too -- it's climbed 1,300% over five years. Though Nvidia's earnings continue to beat analysts' estimates, growth has slowed into the double digits. In the fiscal second quarter, Nvidia reported a 56% gain in revenue, down from a 69% increase in Q1. This doesn't suggest a lack of demand for Nvidia's products or services though -- it's simply a normal part of the growth story. Nvidia's sales today are so high -- at more than $46 billion in the recent quarter -- that a double-digit gain from such a level is extremely positive. On top of this, Nvidia chief Jensen Huang delivered fantastic news to investors during the earnings report this week, calling the AI opportunity ahead "immense." Let's dig into what Huang had to say and consider what's next for the company and for the stock. Before diving in, though, it's a good idea to take a look at why Nvidia has become so successful. The company, which originally served the gaming market with its high-powered chips, recognized the potential of AI early on and decided to make that technology its priority. As a result, Nvidia's graphics processing units (GPUs) rose to the top early in the AI boom -- and Nvidia's commitment to innovation kept the momentum going. Meanwhile, the company also expanded into a complete suite of AI products and services, and that's helped it attract a broad variety of AI customers across industries. All of this has supercharged earnings, helping revenue and profit reach record levels. Now, let's move on to Huang's latest comments during the fiscal 2026 Q2 earnings call. "The opportunity ahead is immense," Huang said, referring to AI. "A new industrial revolution has started." Major tech companies (and Nvidia customers) from Meta Platforms to Alphabet in recent times have spent aggressively on AI build-out, and this is set to continue according to their comments over the past few months. For example, Meta said during its latest earnings report that AI investment is paying off, and it plans to increase its AI infrastructure investment "significantly" next year. This trend has prompted Nvidia to predict between $3 trillion and $4 trillion in AI data center-infrastructure spending by the end of the decade. And due to the strength of Nvidia's products so far and its commitment to innovation, it's likely to win back a great share of that investment. Nvidia's latest major release, the Blackwell architecture, drove $11 billion in revenue in its very first quarter on the market -- that was Q4 ended Jan. 26 of this year. And now the latest update, Blackwell Ultra, is seeing "extraordinary" demand, according to Huang. Next up is the Rubin architecture, on track to launch next year, and importantly, customers can use earlier-generation Nvidia products seamlessly with these newest innovations. So, customers may stick with their older purchases and also benefit from Nvidia's latest releases to power their AI projects. At the same time, Nvidia also is set to gain as newer areas of AI bloom, such as agentic AI -- the ability of AI to solve complex problems -- and robotics. These elements should boost Nvidia's earnings and stock performance over the coming year and beyond. The AI boom looks set to continue, and even if Nvidia's revenue no longer pops in the triple-digits from the year-earlier period, the company still has what it takes to generate impressive growth along with strong profitability. Nvidia has kept its promise of delivering gross margin of more than 70% through the Blackwell launch, so it may continue on that track as Rubin launches too. But, importantly, regardless of the direction the stock takes in the coming weeks or months, Nvidia's long-term growth story remains very bright. And that's why it's a great idea to hold onto this market leader for the long haul.

Should Investors Buy Nvidia's 3% Post-Earnings Pullback? | The Motley Fool

With earnings season in full swing, there was arguably no company whose results were more anticipated than Nvidia (NVDA -1.90%). Over the past couple of years, Nvidia has been in the spotlight due to its crucial role in the artificial intelligence (AI) pipeline. The hype has propelled Nvidia to the world's most valuable public company, with a market cap of over $4.4 trillion. That's over $600 billion more than second-place Microsoft as of the time of this writing. Nvidia's fiscal 2026 second-quarter earnings results were good, but a slowdown in its most important segment (data centers) and an underwhelming outlook for the third quarter (by Wall Street's expectations) caused the stock to drop by 3% after hours. Although the pullback might seem minimal, it's worth considering if now is a good time for investors to buy the stock. Nvidia's overall revenue in the second quarter of fiscal 2026 (ending July 27, 2025) increased 56% year over year to $46.7 billion and was 6% more than it made in the first quarter. Its net income grew 59% from last year to $26.4 billion. Both increases were impressive for a company of Nvidia's size, but all eyes were on Nvidia's data center revenue growth. A large reason for Nvidia's recent success and increased investor interest is the graphics processing units (GPUs) it produces. These GPUs, along with their servers, are a crucial part of data centers and a large reason that companies are able to train, deploy, and scale AI at the levels we've been witnessing. GPUs are to Nvidia's business what iPhones are to Apple's business. In the second quarter, Nvidia's data center revenue increased 56% from a year ago to $41.1 billion. Again, impressive growth, but short of the $41.3 billion that Wall Street analysts had estimated, which is partly why the stock dropped after reporting its earnings. It was the second quarter in a row that data center revenue missed analysts' estimates. Nvidia predicts its Q3 revenue will come in at $54 billion, which would be up a 51% increase from last year. Nvidia CEO Jensen Huang, has made it clear that Nvidia's focus is on being an AI infrastructure company. Huang said he expects the largest AI companies (Microsoft, OpenAI, Amazon, Alphabet, Meta Platforms, and the like) to spend between $3 trillion and $4 trillion on AI-related capital expenditures over the next five years, with Nvidia potentially capturing around 70% of that spend. Whether this plays out as Huang expects remains to be seen, but if we assume he's correct in this assumption, Nvidia is in a great position to continue its impressive growth, and jumping ship on the company based on one quarter of "underwhelming" data center revenue growth would seem silly. The one hiccup in Nvidia's way revolves around its and America's volatile relationship with China. The Trump administration set a ban on H20 chip (Nvidia's China-compliant AI chip) sales to China in April before reversing the decision in July after Nvidia agreed to pay the government a 15% tax on AI-chip revenue made in China. Notably, Nvidia disclosed that while the deal is in place, it has not yet been finalized. Despite the walkback, China encouraged its companies to avoid buying the chip, causing Nvidia to stop its production of them. Overall, Nvidia's future remains promising, but the back-and-forth, volatile relationship with China is something to keep an eye on. Even after a post-earnings pullback, Nvidia's stock remains expensive. It's currently trading at around 41.5 times its projected earnings for the next 12 months, well above the S&P 500's average for the tech sector, which is around 30. Nvidia is also growing its earnings faster than most S&P 500 tech companies, so this in itself isn't a cause to avoid the stock. However, it is a sign to proceed with caution before going all-in because high valuations leave room for sharp pullbacks if Nvidia doesn't meet the lofty expectations that seem priced into the stock. If you're investing in Nvidia for the long term (which you should be), my recommended approach would be to dollar-cost average your way into a stake or to increase the stake you currently have. This approach helps you gradually add shares while also helping to offset some of the seemingly inevitable volatility the stock will have.

Nvidia Stock Slips After Earnings. 2 Crucial Things Investors May Be Ignoring. | The Motley Fool

Investors expect major earnings growth from the AI leader in each quarterly and annual report. Nvidia (NVDA -0.01%) is known for beating analysts' expectations quarter after quarter -- and the artificial intelligence (AI) chip giant continued along the path just this week when it announced soaring second-quarter revenue and profit. Still, that wasn't enough for investors as the stock slipped in after-hours trading following the report. Though Nvidia continues to deliver explosive growth, its 56% increase in revenue is the slowest since the start of the AI boom. In the previous quarter, revenue climbed 69%, and the company has even delivered triple-digit quarterly and annual sales gains in recent years. On top of this, Nvidia's data center sales -- this includes the company's AI business, which is the biggest overall contributor to revenue -- came in just under analysts' estimates in the recent quarter. Nvidia reported $41.1 billion, lower than the $41.3 billion estimate, according to Bloomberg data. All of this weighed on appetite for Nvidia shares, at least in the hours following the report. But, in investing, it's important to take a look at the full picture and focus on the long term before making any decisions. And considering this, here are two crucial things about Nvidia that some investors may be ignoring right now. Before considering the following points, though, it's key to put Nvidia's growth into perspective. Yes, the company is delivering slower growth than it was in the earlier days of the AI revolution, and this is for one good reason: Then, Nvidia's comparison periods were much easier. The company started with lower AI demand and sales, and therefore, as need for AI computing power strengthened, revenue exploded higher. For example, in the second quarter of fiscal 2023, data center revenue totaled only $3.8 billion, then soared in the triple digits to more than $10 billion in the second quarter of the next year. Today, demand and sales still are going strong -- but the percentage increases are lower because we're comparing them to recent quarters of very high revenue levels. So, now, it's critical to focus on the long-term AI opportunity, and here, there's reason to be very optimistic. Nvidia forecasts $3 trillion to $4 trillion in AI infrastructure spending by the end of the decade -- and this leading provider of the world's top-performing AI chips as well as a whole ecosystem of related products is perfectly positioned to benefit. Nvidia chief Jensen Huang says the major cloud service providers have doubled capital spending in two years. And comments from these players, such as Alphabet, suggest the momentum will continue. Importantly, this is only part of the growth story as Nvidia also may gain as companies throughout industries and governments expand their presence in AI. Nvidia's leadership and wide range of AI offerings have made it the go-to place for AI, and its promise to update its chips annually should help it maintain this position. All of this signals investors who hold onto Nvidia stock for years to come could score more wins ahead as the full AI story plays out. Sales growth is great, but it's also important to turn those sales into profitability, and here, Nvidia has been hitting it out of the park quarter after quarter. We can see this through the company's gross margin, which has consistently remained above 70% -- even during periods of greater investment and expense such as the launch of the Blackwell architecture during the fourth quarter of the last fiscal year and in the early months of this fiscal year. In fact, even as Nvidia took a billion-dollar charge earlier this year on chips it couldn't sell to China due to government restrictions, gross margin still exceeded 60%. (Excluding the charge, gross margin topped 71%.) In the recent quarter, Nvidia's gross margin topped 72%, and the company says it aims to finish the year with levels in the mid-70s on a non-GAAP (adjusted) basis. All of this shows that Nvidia has what it takes to balance growth and profitability, a key strength that may ensure success for the company -- and its investors -- over the long term.

Is Nvidia Stock a Buy?

While it recovered most of the immediate after-hours losses, Nvidia's report has likely left investors uncertain about how to view the semiconductor stock going forward. Knowing that, investors may be forced to address something about Nvidia stock that they might prefer to forget. Investors should come to terms with one fact: Despite its massive gains, Nvidia stock is likely to continue moving higher. Admittedly, Nvidia's growth may be difficult to grasp. Most of its gains have come from the AI accelerator market, and OpenAI's initial release of GPT-4 in March 2023 sparked these increases. The gains were nothing short of unprecedented. Since Nvidia's bottom in October 2022, its stock has increased by over 1,450%. That surge took its market cap to almost $4.4 trillion, making it the largest publicly traded company. Since investors have never seen a stock this large grow so much so quickly, an impulse to turn negative on Nvidia investments is arguably natural. Despite possible bearish impulses, Nvidia's numbers overwhelmingly indicate its investors should stay bullish. Here's why. The data center segment, which designs its AI accelerators, was not even Nvidia's largest segment four years ago. Today, it accounts for 88% of the company's revenue, and this share is unlikely to decline. According to Grand View Research, the compound annual growth rate (CAGR) for the AI chip market is projected to be 29% through 2030. Due to Nvidia's dominance in this area, its growth rate has far exceeded this market-growth rate in recent years. In the first half of fiscal 2026, revenue of $91 billion rose by 62%. This has slowed from prior quarters, and yes, investors tend to sour on a stock when growth rates slow, even if the previous rates of increase are unsustainable. However, that is still an unprecedented growth rate, considering Nvidia's massive size. For that same period, Nvidia earned over $45 billion in net income. Interestingly, the 43% increase over the same period lags the revenue growth rate. This is likely because the cost of revenue surged 131% higher over the same period, primarily due to the costs associated with ramping up production to meet the unprecedented demand. Nonetheless, Nvidia's earnings growth has kept the stock's valuation in check despite the aforementioned 1,450% stock returns in under three years. While its P/E ratio of 58 may seem high to more conservative investors, that level is not unusual for fast-growing stocks. Also, the 41 forward P/E ratio also points to a continuing trend of rising profits. When also considering that Nvidia authorized $60 billion in share repurchases, Nvidia stock looks increasingly inexpensive! Additionally, Nvidia excluded China sales, given the political turmoil in that market. That market still comes with a lot of unknowns, but if it generates more revenue and profit for Nvidia, that could lead to further stock growth and a lower valuation. Amid such tailwinds, it is hard to stay mad at Nvidia and its stock. Given Nvidia's dominance in AI accelerators and its unprecedented growth, the stock appears to be a buy today, although this bullish outcome may be difficult for some investors to accept. Indeed, when it comes to the 1,450% return in under three years, the move is unprecedented for such a large company. Moreover, since investors often turn against stocks with slowing growth rates, some investors may be reluctant to buy more shares. However, objectively speaking, there is nothing slow about Nvidia's growth. Considering the continued demand for AI accelerators and its market dominance, investors can likely expect the rapid revenue and profit increases to continue. When one also considers the stock's relatively low valuation, the evidence suggests staying bullish on Nvidia, even if one's emotions may say otherwise.

Nvidia Earnings Show Shift From Hyper to High Growth | Investing.com UK

Nvidia's (NASDAQ:NVDA) latest results mark a crucial turning point for global markets. The company that has been the engine of the AI trade is no longer in the hyper-growth phase. It's still growing at extraordinary speed, but that expansion is now moderating into what should be called high growth. For investors, that shift carries profound consequences. The numbers themselves were impressive at first glance. Nvidia delivered second-quarter adjusted earnings per share of $1.04 on revenue of $46.7 billion, beating analyst expectations. Data center sales, which make up the bulk of the business, surged 56% year-on-year to $41.1 billion. These are figures most companies could only dream of reporting. Yet beneath the headline beat, there were clear signs of cooling momentum. The all-important data center unit missed consensus forecasts. Gross margins fell from 78% to 72%, a sharp contraction for a company that had been printing record profitability. Looking ahead, revenue growth is projected to slow to 52%. This is still enormous expansion, but it is a step down from the triple-digit pace that propelled the stock into the market stratosphere. Markets had priced Nvidia as though the extraordinary trajectory of the past 18 months could continue indefinitely. That was never realistic. Even the most dominant companies eventually reach a point where growth normalizes. The earnings call confirmed that Nvidia has reached that point. Shares slipped in after-hours trading as investors began to adjust to the new reality. The risks are not just about growth rates but also about concentration. Reports indicate that two customers -- widely believed to be Microsoft and Meta -- now account for around 30% of Nvidia's revenue. This is a startling level of dependence. If even one of those clients curbs spending, the impact would be immediate and severe. Equity markets dislike fragility, and this kind of reliance creates precisely that. Competition is another factor. AMD and Intel are rolling out new products at speed, while hyperscale cloud providers are pouring resources into developing their own in-house chips. These dynamics are beginning to erode Nvidia's margins. For all its innovation and scale, the company cannot remain the sole beneficiary of the AI revolution. Geopolitics compounds the challenge. US restrictions on sales of the H20 chip to China are cutting Nvidia off from a market its chief executive has valued at $50 billion. China, in turn, is throwing heavy state backing behind local rivals. In semiconductors, political policy has become inseparable from business strategy, and Nvidia is caught in the middle of the contest between Washington and Beijing. What emerges is a paradox. Nvidia remains absolutely central to the AI story. Its chips continue to power the most advanced models and the most ambitious deployments. But its status as the single dominant winner is under threat. Growth in AI demand is relentless, yet Nvidia's share of that growth is being diluted by rivals, customers, and governments. The story is no longer about one company defining the future -- it is about an entire industry advancing in parallel. This matters far beyond Nvidia itself because of the company's influence on equity markets. Technology now accounts for nearly 30% of the S&P 500. Nvidia, together with Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT), makes up more than 15% of the entire index. In 2024, Nvidia alone contributed more than a quarter of the S&P's gains. Such concentration is extraordinary, and it is increasingly precarious. Markets cannot continue to rely on one company to deliver so much of the growth narrative. As its dominance eases, volatility in indices becomes more likely. That said, the structural case for AI investment is stronger than ever. Demand for computing power, chips, data infrastructure, and the electricity to run it all is expanding at breakneck speed. Estimates suggest that global data center energy consumption will more than double by 2030. AI is not a passing trend; it is reshaping the economy in ways that are only beginning to be quantified. Productivity improvements are real, enterprise adoption is scaling, and consumer applications are proliferating. For investors, the lesson is adaptation. Hyper growth has given way to high growth at Nvidia. That does not mean the AI trade is finished -- far from it. It means the spoils will be spread more widely. Opportunities will emerge across the ecosystem: in rival chipmakers, in software firms that apply AI across industries, in utilities and energy companies meeting new demand, and in infrastructure providers building the backbone of digital economies. Nvidia's results are a reminder that no single stock can shoulder the weight of a global investment theme forever. The AI era is not ending; it is broadening. Those who adjust portfolios accordingly will be best placed to capture the next phase of growth.

Nvidia Stock Faces Reality Check as Growth Slows but Margins Stay Strong | Investing.com UK

Nvidia's (NASDAQ:NVDA) latest earnings reinforced its dominance in the artificial intelligence chip market, yet investors reacted cautiously. Record sales and robust margins failed to prevent a pullback in the share price, underscoring just how high the bar has become for the world's most valuable company. For the fiscal second quarter, Nvidia delivered $41.1 billion in data center sales, a 56% year-over-year increase. That's extraordinary by any historical measure, yet it marks the slowest growth rate in more than two years. The stock lost about 3% after hours, as investors digested results that, while impressive, fell just short of Wall Street's lofty targets. Shares had already surged 65% since April, outperforming Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOGL), and Meta (NASDAQ:META) -- the very customers fueling demand for Nvidia's chips. With the company now worth more than $4 trillion, the bar for upside keeps getting higher. One bright spot: profitability. Gross margins hit 72.4%, far above the low-60% range Nvidia averaged before the AI boom. Management expects margins to stay in the mid-70s by year-end, suggesting Nvidia still has pricing power even as competition intensifies. That's crucial because rivals like AMD and in-house chips from Amazon and Google are starting to nibble at market share. For now, Nvidia remains the undisputed leader in the high-performance chips powering generative AI, but investors must weigh how sustainable these margins are. Geopolitics continues to complicate the outlook. Sales of the H20 chip to China remain stalled, despite the Trump administration's recent green light. Nvidia has yet to ship units and is navigating unresolved questions around a potential 15% revenue cut demanded by U.S. authorities for China-related sales. If approvals lag or new restrictions emerge, near-term revenue could fall short of guidance. The company already warned it may not deliver any H20 shipments this quarter. Technically, Nvidia remains in an uptrend, but the stock's reaction shows investors are increasingly sensitive to any growth miss. Support sits near $1,100; a break below could open room to $1,000. On the upside, a sustained move above $1,250 would confirm that buyers are still willing to push valuations higher despite slowing growth. Nvidia's "new normal" is still extraordinary: double-digit growth, dominant market share, and premium margins. But with a $4 trillion valuation, even small disappointments can jolt the stock. Investors betting on further gains need to weigh whether AI momentum alone can overcome slowing growth, rising competition, and geopolitical risks. For now, Nvidia remains the market's kingmaker -- but the crown is starting to feel heavy.

Nvidia Q2 Earnings Review: Growth Slows After 2 Years of AI Boom | Investing.com UK

Results: Nvidia beat earnings expectations with July-quarter revenue of $46.7 billion (roughly in line with consensus) and quarterly net income of $26.4 billion, up 59% year over year. Data-center performance: Data-center revenue -- the business driving the AI cycle -- rose 56% to $41.1 billion but fell just short of the $41.3 billion analysts had expected. Guidance and uncertainty: Management guided to $54 billion for the current quarter, a modest beat of Street estimates, but that outlook explicitly excludes any China chip revenue, leaving a material source of uncertainty for future growth. Capital return: The company announced a $60 billion buyback, which should be accretive to EPS and signals confidence from management in capital allocation. Takeaway: While results and the buyback are supportive for shareholders, the tepid guidance relative to the string of blockbuster quarters has investors watching closely for signs that demand for AI chips is plateauing and for clarity on China sales and near-term enterprise spending. Since 2006, NVDA has experienced an average increase of 7.7% in August, with positive performance in 85% of those years, and an average increase of 0.3% in September, occurring 63% of years. *** InvestingPro provides a comprehensive suite of tools designed to help investors make informed decisions in any market environment. These include: Not a Pro member yet? Check out our plans here.