Key Takeaways:
Nvidia's fiscal second-quarter sales reached $96.2 billion, a 106% jump that topped Wall Street estimates for a 15th consecutive quarter on sustained AI chip demand.
The adoption is reaching consumers faster than any prior technology, JPMorgan Chase strategists said, arguing AI is outpacing the early trajectories of computers, the internet and smartphones.
Management guided current-quarter revenue to $108 billion and projected 70% growth for fiscal 2028, up from $6.7 billion in sales in the same quarter of fiscal 2023, before ChatGPT. Adjusted earnings rose 120%, ahead of the 108% analysts expected, while revenue beat the 87% growth consensus.
The stock still trades at 23.4 times forward earnings, about 45% below its five-year average and the cheapest since the AI boom began in 2023, as investors weigh the durability of AI capital spending. Shares slipped 4.6% on Aug. 28, erasing nearly $250 billion in market value a day after jumping 8.7% on the results.
A valuation discount built on capex doubts
Bears point to circular financing, where Nvidia has invested billions in OpenAI, CoreWeave and SpaceX that those companies then used to buy its chips. They also argue hyperscalers depreciate Nvidia silicon too slowly, over four to six years versus the two-to-three-year useful life that investor Michael Burry estimates, inflating reported earnings.
Bulls counter that CoreWeave recently signed a contract to rent Nvidia A100 GPUs, introduced in 2020, through 2029 — implying a useful life closer to nine years. About one in four U.S. firms have deployed AI, according to JPMorgan.
The forward price-to-earnings-to-growth ratio of 0.48, below the 1.0 threshold typically seen as undervalued, reflects expectations for roughly 50% annual earnings growth over three years. Among 69 analysts, the median 12-month target is $318, implying 46% upside from the $217 close.
History points to a post-earnings drift
Nvidia has beaten consensus earnings in 15 straight quarters, yet shares fell an average 4% in the month after each of the last eight reports. The stock has advanced about 1.5% over three months and 17% year to date, with rallies meeting profit-taking.
The stock's three-month correlation with the PHLX Semiconductor Index stands at 0.03, the lowest among the index's components, according to Bespoke Investment Group data. That near-zero reading means Nvidia trades on company-specific forces — hyperscaler spending, margins and confidence in the data-center buildout — rather than the chip cycle that moves Intel, Taiwan Semiconductor Manufacturing and Micron, whose correlations exceed 0.80.
Near-term support sits at $208 to $210, with the 200-day average near $196 on a deeper reset. A sustained move above $228 would reopen a test of the roughly $236 record high.
The valuation stays defensible if Nvidia sustains sales growth and margins while customers earn adequate returns on AI infrastructure. Investors will watch the fiscal third-quarter report, due in November, for evidence that data-center demand and margins hold.
This article is for informational purposes only and does not constitute investment advice.
