Is Nvidia Stock a Buy Now?

Nvidia reported strong Q1 fiscal year 2026 results with revenue up 69% year-over-year to $44 billion, driven by robust demand for its data center GPUs; however, U.S. government export restrictions on H20 chips resulted in a $4.5 billion charge for excess inventory and $2.5 billion in lost revenue. Factoring in the impact of these restrictions, Nvidia's underlying growth remains robust, with demand for GPUs showing no signs of slowing, leading to a positive market reaction despite the headwinds and a forward P/E of 33.

Analysis

Nvidia's Q1 fiscal year 2026 performance showcased continued robust demand in the artificial intelligence sector, with revenues surging 69% year-over-year to $44 billion, underscoring its dominant position with over 90% market share in data center GPUs. However, this growth was tempered by U.S. government export restrictions implemented on April 9, specifically impacting its H20 chips. These restrictions led to a $4.5 billion charge for excess inventory and an unrealized $2.5 billion in Q1 revenue. Adjusted for these regulatory impacts, Nvidia's underlying revenue growth would have been approximately 79% in Q1, closely aligning with the 78% growth reported in Q4, suggesting that fundamental customer demand remains exceptionally strong. Management's Q2 revenue projection of $45 billion, representing 50% year-over-year growth, also reflects these ongoing restrictions; absent these, Q2 revenue could have approached $53 billion, translating to a 77% growth rate. The market reacted positively to these results, looking past the immediate impact of export controls, and the stock now trades at a forward price-to-earnings ratio of 33, a valuation that reflects its significant growth trajectory, even as the trailing P/E multiple is temporarily distorted by the inventory write-off.

Key Decisions for Investors

• Investors should assess Nvidia's valuation in the context of its strong underlying growth, which remains robust when adjusting for government-imposed export restrictions, rather than solely focusing on the reported near-term slowdown.
• It is crucial to monitor developments related to U.S. export controls on advanced chip technology, as these regulations represent the primary headwind to Nvidia's otherwise accelerating growth trajectory and could significantly influence future revenue and profitability.
• Given the sustained AI tailwinds and the company's strong core business performance, a long-term investment horizon of three to five years may be appropriate, while acknowledging the stock's premium valuation at 33 times forward earnings.