Nvidia: 5 Channel Checks Ahead Of Earnings

Nvidia (NVDA) is scheduled to announce earnings on May 28th, with expectations high due to strong AI demand and channel checks indicating potential revenue and EPS surpassing estimates of ~$43B and ~$0.87, respectively. The company dominates the AI GPU market, fueled by hyperscaler investments, neocloud provider growth, and geopolitical demand, though it faces risks including geopolitical tensions, customer concentration, and competition from AMD and in-house chip development; Taiwan Semiconductor's (TSM) increased capex and AI chip production further support Nvidia's growth trajectory.

Analysis

Nvidia Corporation (NVDA) is poised for its earnings announcement on May 28th, with significant anticipation driven by its central role in the Artificial Intelligence megatrend. The company commands an estimated 85-90% market share in AI chips, a market projected to grow at a ~36% CAGR through 2030. Demand for its Hopper (H100, H200) and upcoming Blackwell chips dramatically outstrips supply, with the data center segment, crucial for cloud AI, generating $39.3 billion in revenue last quarter, constituting over 80% of Nvidia's total. Five key channel checks suggest Nvidia is likely to surpass its revenue guidance of ~$43 billion and EPS guidance of ~$0.87. Hyperscalers like Meta (raised 2025 capex to $64–$72 billion), Amazon (expanding Nvidia collaboration), Microsoft (FY2025 AI data center budget of $80 billion), and Elon Musk's xAI (planning a $30-40 billion GPU purchase) are significantly increasing AI investments. Neocloud providers are also exhibiting rapid growth, with CoreWeave reporting 420.3% year-over-year Q1 revenue growth to $0.98 billion and a $25.9 billion backlog, and Nebius Group reporting a 385% year-over-year revenue increase to $55.3 million. Wall Street sentiment is strongly positive, with analysts like Morgan Stanley noting a rise in Nvidia’s rack shipments and Loop Capital emphasizing the Blackwell ramp-up, collectively viewing the stock as over 20% undervalued. Taiwan Semiconductor (TSM), Nvidia's key foundry, reported a 41.6% Q1 2025 year-over-year revenue increase and highlighted "insatiable" orders for Blackwell GPUs, prompting an increase in its 2025 capex to $38-$42 billion. Geopolitical factors, including a $20 billion AI chip deal with Saudi Arabia and U.S. onshoring initiatives, further bolster demand, despite a $5.5 billion Q1 impact from U.S. export restrictions to China. Nvidia maintains high profitability with a 55.9% net margin and a compelling forward PEG ratio. However, risks include geopolitical volatility, hyperscaler concentration (50% of revenue from a few clients), and competition from AMD and in-house chip development by large tech firms. The upcoming earnings will be scrutinized for insights into tariff impacts, the Blackwell ramp-up status, and the sustained strength of the AI megatrend.

Key Decisions for Investors

• Given the strong positive channel checks, robust demand outlook, and Nvidia's dominant market position, investors might consider maintaining or initiating long positions ahead of the earnings report, anticipating a potential beat on revenue and EPS guidance.
• Closely monitor the earnings call for management's commentary on the Blackwell chip ramp-up, specifically how demand continues to exceed supply, and any updated guidance on the impact of geopolitical factors, including tariffs and export controls.
• While the outlook appears favorable, investors should remain vigilant regarding concentration risk from hyperscaler clients and the long-term competitive landscape, including advancements by AMD and in-house chip development by major customers, as these could influence future growth trajectories and market share.