NVIDIA Faces High Wall Street Expectations Amid AI Boom

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Two years ago, the explosive growth of generative artificial intelligence began transforming NVIDIA's business. Since then, the chip manufacturer's revenue has more than tripled, and profits have quadrupled.

NVIDIA is scheduled to release its second-quarter earnings on Wednesday, marking the two-year anniversary of the company's growth trajectory as it transformed from a gaming chip manufacturer to its current central position in the tech industry.

Last month, NVIDIA became the first company to reach a $4 trillion market capitalization, and its value continues to rise. Since late 2022, around the time OpenAI launched ChatGPT and sparked the AI frenzy, NVIDIA's stock price has surged 12-fold. The stock has gained 33% year-to-date and closed at $177.99 on Friday.

For a company of NVIDIA's scale, growth remains substantial, but the pace has significantly decelerated. After five consecutive quarters of triple-digit growth in 2023 and 2024, the first quarter of this year saw growth slow to 69%. According to LSEG's analyst consensus, NVIDIA's second-quarter revenue is expected to grow 53% year-over-year to $45.9 billion.

In the first quarter of this year, data center revenue accounted for 88% of NVIDIA's total sales, the clearest indication of AI's importance to its business. The company stated that 34% of total sales last year came from three undisclosed clients. Analysts indicate that NVIDIA's top end-users are major internet companies and cloud providers such as Microsoft, Google, Amazon, and Meta.

"NVIDIA's assumptions and performance actually determine how the market will start pricing AI trades, and the entire AI trade has basically been driving the market over the past year," said Melissa Otto, Head of Visible Alpha Research at S&P Global, which aggregates Wall Street research.

NVIDIA accounts for approximately 7.5% of the S&P 500 index.

Excluding NVIDIA, large-cap tech companies reported quarterly results at the end of July, informing Wall Street of their investment plans. Overall, they plan to spend approximately $320 billion this year on AI technology and data center construction.

OpenAI remains privately held but is valued at hundreds of billions of dollars. The company announced it will collaborate with SoftBank and Oracle.

President Donald Trump announced in January that $500 billion will be invested in the "Stargate" project over the next four years.

Analysts indicate that approximately half of AI capital expenditure ultimately flows to NVIDIA. The company's reliance on so-called hyperscale computers makes it vulnerable to macroeconomic conditions and changes in the AI industry, which remain difficult to predict.

OpenAI CEO Sam Altman said last week that he believes "investors are overall too excited about AI," even suggesting it might be a "bubble."

But don't expect the stock market to retreat just yet. OpenAI CFO Sarah Friar said Wednesday that the company "consistently" lacks sufficient computing capacity.

As always, Wall Street will closely watch NVIDIA's earnings guidance and other forward-looking comments from CEO Jensen Huang. According to LSEG, analysts expect third-quarter revenue to grow 50% to $52.7 billion. Analysts say that if NVIDIA's second-quarter guidance exceeds expectations, this "beat and raise" could drive AI optimism even higher.

NVIDIA's most important product is the Blackwell series, which includes individual graphics processing units and complete systems connecting 72 GPUs.

Ryuta Makino, an analyst at Gamco Investors who holds NVIDIA shares, said strong Blackwell data would confirm NVIDIA's continued technological leadership and foothold among key customers.

"This solidifies that hyperscale spending remains very robust," Makino said.

NVIDIA said in May that its new product line generated $27 billion in sales, accounting for about 70% of data center revenue. This represents a significant increase from the previous quarter's $11 billion.

As more Blackwell chips are installed, experts expect their superior computing capabilities will enable companies like OpenAI and Anthropic to create more powerful AI models. OpenAI's GPT-5, announced earlier this month, was trained on NVIDIA's previous-generation Hopper chips, not the newer Blackwell processors.

NVIDIA said last year that Blackwell would be constrained by supply—the number of chips its partners can manufacture and ship—rather than demand.

Blackwell Ultra is expected to begin shipping in the second half of 2025. NVIDIA recently refuted an analyst report from Asia claiming that Rubin chip technology, expected to account for most GPU sales in 2027, encountered problems in early production.

One obvious sign of NVIDIA's rise is Huang's global recognition, frequently mentioned by Trump.

H20 is valuable to NVIDIA. The company said in May that the chip would generate approximately $8 billion in sales in the second quarter.

NVIDIA did not include any H20 sales in its second-quarter guidance, and analysts doubt whether it will include any sales in current forecasts.

KeyBanc analysts said that if H20 is included in guidance, it could raise revenue expectations by approximately $2-3 billion, and they recommend buying the stock. However, they said they expect NVIDIA to completely exclude it.

"Additionally, considering the potential 15% tax on AI exports, we expect management to provide conservative guidance," KeyBanc analysts wrote.

"I'm sure he's been lobbying the president," Commerce Secretary Howard Lutnick said about Huang during a show last week.

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