Munster previews NVIDIA's earnings, highlights U.S. chip restrictions

Deepwater Asset Management's Gene Munster anticipates Nvidia's upcoming earnings will reflect a $15 billion revenue reduction over the next three quarters due to U.S. chip restrictions on China, though this sets up easier comparisons for CY26. Despite projected downward revisions to CY25 revenue growth estimates from 56% to around 40%, driven by the export curbs and a $5.5 billion write-off, underlying GPU demand remains strong, potentially offset by AI infrastructure spending from companies like xAI and Apple. Munster suggests that CY26 revenue growth could surpass current Street expectations of 24%, and that Nvidia remains the best way to invest in the AI buildout, with potential for multiple expansion if management signals revenue re-acceleration in late CY25.

Analysis

Deepwater Asset Management's Gene Munster anticipates Nvidia's upcoming earnings will reveal a significant impact from U.S. chip restrictions on China, projecting a $15 billion revenue reduction over the next three quarters and noting a $5.5 billion inventory write-off in the April quarter due to the sidelining of the H20 chip. This is expected to lead to downward revisions in Street revenue growth estimates for CY25, from 56% to approximately 40%. Despite these headwinds, the underlying demand for GPUs continues to soar, and the ongoing AI infrastructure buildout is still in its early stages, offering partial offsets. Nvidia is reportedly fast-tracking a "Blackwell-lite" chip, potentially shipping as soon as June, which could add back approximately $5 billion in revenue each quarter. While buy-side models have adjusted July revenue guidance downwards to $38 billion (from $45 billion imprint estimates) to reflect the U.S. curbs, demand from non-China customers is reportedly exceeding expectations, suggesting the current dip is temporary and linked to export logistics rather than fundamental end-market weakness. Looking further ahead, CY26 revenue growth is forecast to surpass the current Street expectation of 24%, bolstered by significant AI projects such as xAI's 'Colossus' data center, which could account for $30-$40 billion in Nvidia hardware sales, and Apple's planned increase in AI investment. Deepwater estimates that current Street revenue expectations for CY26 (around $245 billion) are approximately 10% too low, implying Nvidia could trade closer to 20x forward EPS once upward revisions materialize. Munster maintains that owning Nvidia remains the most direct investment in the AI buildout, with potential for P/E multiple expansion if management reiterates a revenue re-acceleration late in CY25 as additional Blackwell supply becomes available.

Key Decisions for Investors

• Investors should closely monitor management's commentary on the timeline and market reception of the 'Blackwell-lite' chip, as its success is crucial to mitigating the projected $15 billion revenue shortfall from China.
• Focus on Nvidia's guidance for revenue re-acceleration in late CY25; confirmation of this trend, driven by new Blackwell supply, could unlock further P/E multiple expansion.
• Consider the potential for upward revisions to CY26 revenue estimates, given the robust underlying GPU demand, major AI projects like xAI's 'Colossus', and increased AI spending from entities like Apple, which supports a long-term bullish thesis despite near-term regulatory challenges.