Nvidia (NASDAQ: NVDA) shares were roughly flat in early trading Wednesday, as investors positioned ahead of the company's fiscal second-quarter earnings report due August 26. The stock edged 0.1% lower, following a 2.3% decline on Tuesday amid a broader selloff in semiconductor stocks.
The upcoming results are the primary focus for investors, with analysts widely expecting another strong performance from the leading AI chipmaker. The company's data center business has been a key growth driver, and capital expenditure trends among hyperscalers and enterprises remain robust.
China approvals could provide an additional boost
One potential source of upside is Nvidia's business in China. According to a Financial Times report, Chinese authorities have allowed domestic companies ByteDance and Tencent to receive approximately 10,000 Nvidia H200 processors each in recent weeks. Other Chinese firms may also receive approval for similar shipments, the report said.
Investors will be closely watching Nvidia's commentary on China revenue when it reports results, as restrictions and approvals have been a key variable. Morningstar highlighted China sales as an issue to watch, expecting the company to provide an update on sales into the region.
Morningstar has a fair value estimate of $280 per share and a four-star rating on Nvidia, with a wide economic moat and a very high uncertainty rating.
Analysts expect another beat-and-raise quarter
Morningstar said it is looking for another "beat-and-raise" quarter from Nvidia, citing strong capital expenditure trends among hyperscalers and enterprises. The firm projects Nvidia will generate well over $300 billion in data center revenue in calendar 2026 (fiscal 2027) and potentially more than $500 billion in fiscal 2028.
The earnings report is also expected to provide updates on Nvidia's product roadmap. Reports surrounding Rubin Ultra, expected in late 2027, suggest the product will still arrive but may not meet all of Nvidia's ambitious technological targets.
Nvidia's financing and backstopping of AI infrastructure partners is another area Morningstar plans to monitor. The firm noted Nvidia's recently announced $500 billion mobilization of large financial asset managers to invest in artificial intelligence, as well as smaller arrangements involving Sharon AI and Firmus. This follows Nvidia's $500 billion AI funding plan that has put leverage in the spotlight.
Morningstar maintained that Nvidia's competitive position remains intact, citing its AI GPU hardware, CUDA software ecosystem, and networking and interconnectivity capabilities.
Stifel expects earnings beat
Stifel also reiterated a Buy rating on Nvidia with a $282 price target ahead of the earnings report. The firm expects Nvidia to beat estimates and raise its guidance. Stifel noted that debates surrounding memory costs and competition in AI inference are more likely to show up in Nvidia's gross margin than in demand.
Nvidia currently has a 74.15% gross profit margin, reflecting the company's pricing power in the AI chip market. The company's Q3 revenue could top $110 billion, according to UBS, as the Rubin ramp progresses.
Investors will also be watching for any updates on Nvidia's $105 billion OpenAI lease guarantee that fuels its AI infrastructure push. The company's H200 chips have reached China, but Beijing restricts mainland use, adding another layer of complexity.
As the earnings date approaches, market participants will be looking for signs of sustained demand and any potential headwinds. The broader semiconductor sector has been volatile, with Nvidia sliding 2% as the 30-year Treasury yield topped 5.3%, pressuring chip stocks.
This article is for informational purposes only and does not constitute financial advice.
