Following the green light to ship chips to China, there appears to be no looking back for chip industry behemoth Nvidia (NVDA). Artificial intelligence (AI) demand remains a massive tailwind for the company, and Nvidia is preparing for the launch of its next-gen GB300 shipments in the latter half of this year.
Against this backdrop, should investors be excited for Nvidia’s upcoming second-quarter results, which are set to be released on Aug. 27?
Little needs to be said about the capabilities of this semiconductor industry juggernaut. Nvidia is a global leader in the manufacture of graphics processing units (GPUs), which are the cornerstone of the advancing AI field. Nvidia’s powerful hardware is transforming businesses by accelerating AI workloads and data analytics. With a massive market capitalization of $4.2 trillion, this AI darling holds the crown of the most valuable company in the world.
Nvidia has been at the center of the AI race between the U.S. and China. While there were some restrictions in place, President Donald Trump’s administration had outright banned the export of H20 chips to China. Recently, however, Nvidia won approval to ship its advanced H20 chips to the country. These chips are expected to be used in AI operations in China, and were explicitly designed to comply with restrictions, allowing them to be marketed in the Chinese market.
Nvidia also stands to benefit from the easing of some non-tariff restrictions. However, China’s cyberspace regulators have summoned Nvidia over concerns about the security of these chips, asking for an explanation for “backdoor safety risks” in its H20 chips. On the other hand, these chips are in high demand in China, prompting the company to expand and not rely solely on its existing stockpile. As a result, Nvidia has reportedly ordered 300,000 H20 chipsets from contract manufacturer Taiwan Semiconductor (TSM).
NVDA stock remains in demand among investors. Over the past 52 weeks, the stock has gained 59%. Shares of the chip manufacturer reached a 52-week high of $183.30 on July 31 and are only off about 5% from this mark. NVDA stock is also up 29% so far this year.
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Justifiably, Nvidia’s valuation is stretched compared to its peers, with its price sitting at 44 times forward earnings.
On May 28, Nvidia reported solid first-quarter results for fiscal 2026 (the quarter that ended April 27). For the period, revenue increased 69% year-over-year (YOY) to $44.1 billion. This was higher than the $43.28 billion that Wall Street analysts were expecting. Data center revenue was $39.1 billion, up 73% from the year-ago value.
Nvidia’s non-GAAP EPS increased by 33% YOY to $0.81, surpassing the analyst estimate of $0.75.
At the heart of this growth was solid demand for Nvidia’s AI infrastructure. On the other hand, the company recorded a $4.5 billion charge associated with excess inventory of H20 chips and purchase obligations as demand dropped due to export restrictions.
Wall Street analysts are optimistic about Nvidia’s future earnings. The company’s EPS is expected to climb by 45% YOY to $0.94 for Q2 fiscal 2026, which is set to be reported on Aug. 27 after the market closes. For the current fiscal year, EPS is projected to surge 37% annually to $4.02, followed by a 33% growth to $5.34 in the next fiscal year.
Analysts are exceptionally bullish on NVDA stock now, especially since it is the frontrunner in the highly lucrative AI space. Recently, Morgan Stanley analyst Joseph Moore raised the price target on the stock to $200 while maintaining an “Overweight” rating. Moore sees significant potential in Nvidia’s planned expansion of its Blackwell infrastructure later this year, which could drive the next phase of the company’s growth.
Analysts at Mizuho also raised the price target on NVDA from $185 to $192, keeping their “Outperform” rating. Mizuho raised the target after the company announced it could restart GPU shipments to China, noting that Chinese customers — such as ByteDance and Tencent (TCEHY) — are already applying for licenses to obtain the H20 chips.
Analysts at Needham cited the same reason for raising their price target on Nvidia from $160 to $200, maintaining a “Buy” rating. Needham stated that the lifting of restrictions gives clarity about the future of Nvidia’s business in China.
Nvidia has been in the spotlight on Wall Street for some time now, with analysts awarding it a consensus “Strong Buy” rating overall. Of the 45 analysts rating the stock, a majority of 39 analysts rate it a “Strong Buy,” two analysts suggest a “Moderate Buy,” three play it safe with a “Hold” rating, and only one analyst gives NVDA a “Strong Sell” rating. The consensus price target of $183.88 represents 6% upside from current levels. However, the Street-high price target of $250 indicates 44% potential upside.
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Nvidia could unlock a new growth chapter based on the planned expansion of its Blackwell architecture. At the same time, the resumption of its booming business in China should bode well for the company. In this situation, anticipating robust gains from its Q2 results would not be a stretch.
On the date of publication, Anushka Dutta did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
