Nvidia’s revenue doubles in Q2, but are investor expectations too high?

Nvidia opens a new tab is expected to publish on Wednesday that its second-quarter revenue has more than doubled. However, investors who have grown accustomed to its record-breaking performance will anticipate much more from the artificial intelligence chip titan.

A beat or miss on Wall Street estimates may either fuel or undermine an AI rally on Thursday, the day after Nvidia releases profits for the May-July quarter. The company’s stock has risen more than 150% this year, increasing its market worth by $1.82 trillion and propelling the S&P 500 to new highs. On Monday, it fell 2.2% in afternoon trading, dragging on the index.

However, despite these great achievements, there is concern that even a minor deviation from predicted outcomes could harm Nvidia’s stock. Investors have extraordinarily high expectations, and any departure from them could result in a sell-off, especially considering Nvidia’s current value of over 37 times forecast earnings. Furthermore, some are concerned about anticipated delays in the production of Nvidia’s next-generation Blackwell AI processors, which might harm future growth and margins.

Despite Nvidia’s outstanding expansion, there are possible obstacles to its future performance. The company’s adjusted gross margin is forecast to fall by more than three percentage points from the previous quarter, to 75.8%. This decrease is related to the higher costs associated with ramping up production to fulfill the rising demand for its product.

Furthermore, there are concerns about likely production delays for Nvidia’s next-generation Blackwell AI chips. CEO Jensen Huang had previously stated that these chips will ship in the second quarter, but analysts have raised concerns about design difficulties that could push the date back. If these delays happen, they could affect Nvidia’s revenue growth in the first half of next year, adding another degree of uncertainty.

Nvidia’s second-quarter earnings announcement will not only reflect the company’s success, but it may also influence investor sentiment throughout the AI sector. Nvidia’s performance will be heavily analyzed by market participants because it serves as a standard for both the semiconductor sector and AI in general.