NVIDIA (NVDA) Stock: Why Wall Street Expects a Post-Earnings Rally

TLDR:Nvidia stock rose 5.4% Monday and continued upward Tuesday on eased US-China trade tensionsAnalysts expect strong Q1 earnings despite export restrictions on advanced AI chips to ChinaUBS slightly lowered price target to $175 from $180 but predicts growth acceleration in second half of 2025Nvidia is reportedly close to releasing a modified chip for the Chinese marketThe stock is currently trading at a discount to its historical valuation despite continued AI spending from major customersNvidia (NVDA) stock continued its upward movement Tuesday following Monday’s 5.4% gain, as investors grow optimistic about the chipmaker’s upcoming earnings report on May 28.The stock edged up 0.1% in Tuesday premarket trading to $123.08 after Monday’s rally, which was sparked by a temporary reduction in US-China trade tensions.NVIDIA Corporation (NVDA)The broader semiconductor sector also benefited from the trade news. The PHLX Semiconductor Index jumped 7% on Monday, with Intel gaining 3.6%, Marvell Technology adding 8%, and Taiwan Semiconductor rising 5.9%.Beijing and Washington have agreed to drastically reduce tariffs for 90 days while working toward a more permanent solution. This easing of tensions has boosted investor confidence in the chip sector.Despite these positive developments, Nvidia still faces restrictions on shipping its most advanced artificial intelligence chips to China. However, UBS analysts remain upbeat about the company’s Q1 performance.Market Expectations and Analyst ViewsUBS strategists led by Timothy Acuri expect Nvidia’s revenue to slightly exceed current estimates. They do predict earnings per share may come in slightly below consensus forecasts.Acuri lowered his price target for Nvidia from $180 to $175, citing the impact of the ban on Nvidia’s H20 chip in China. However, he maintains a bullish outlook for the second half of 2025.“We do see growth reaccelerating substantially in the second half as GB300 racks start to ramp,” Acuri wrote in a recent note. He also suggested Nvidia might be allowed to “reship a modified Blackwell-based chip into China.”According to Reuters, Nvidia is close to releasing a downgraded version of its H20 chip specifically designed for the Chinese market. The company has declined to comment on these reports.Source: Y ChartsNvidia’s stock is currently trading at a price-to-earnings ratio of nearly 40 based on fiscal 2025 earnings. This represents a significant discount to its 10-year average P/E ratio of 59.7.Looking forward, Wall Street expects Nvidia to deliver earnings per share of $4.41 during fiscal 2026. This places the stock at a forward P/E ratio of 26.4, suggesting potential upside.The company’s upcoming Q1 report is expected to show revenue of approximately $43 billion, representing 65% growth compared to the year-ago period. Data center sales, which include AI GPUs, are likely to account for around 90% of total revenue.Future Growth ProspectsNvidia CEO Jensen Huang has ambitious projections for the AI market. At the company’s GTC conference in March, he told attendees he expects annual data center spending to reach $1 trillion by 2028.This growth forecast is driven largely by the increasing computing power required by advanced reasoning AI models. These models need up to 100 times more computing power than traditional large language models.Nvidia may also provide an update on its upcoming Rubin GPU architecture during the May 28 earnings call. This next-generation chip is expected to deliver 3.3 times better performance compared to the current Blackwell Ultra architecture.The company’s top customers, including Meta Platforms, Amazon, Microsoft, and Alphabet, plan to spend a combined $320 billion on AI data center infrastructure and chips in 2025.Despite concerns about tariffs potentially impacting their core businesses, none of these major customers have reduced their capital expenditure plans. In fact, Meta Platforms recently increased its forecast spending range to between $64 billion and $72 billion.Investors will be closely watching Nvidia’s guidance for the current quarter. Wall Street analysts are looking for total revenue guidance of around $46.4 billion. A forecast below this figure could trigger a sell-off.Nvidia is scheduled to report its fiscal 2026 first-quarter results on May 28.The post NVIDIA (NVDA) Stock: Why Wall Street Expects a Post-Earnings Rally appeared first on CoinCentral.