Nvidia’s AI Growth Story Is Far from Over. Buying the Post-Earnings Dip in NVDA Stock Makes Sense

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Nvidia’s AI Growth Story Is Far from Over. Buying the Post-Earnings Dip in NVDA Stock Makes Sense.

investing ideas :: 2025-08-29 :: source - barchart

By Mohit Oberoi

Nvidia (NVDA) released its fiscal Q2 2026 earnings yesterday, Aug. 27, after the markets closed. The overall earnings were better-than-expected, not that the market expected a different outcome from the chip designing giant's report. However, as has been the case on more than one occasion over the last few quarters, NVDA stock is slipping despite beating consensus estimates. In this article, we’ll look at the key takeaways from Nvidia’s report and examine whether it makes sense to buy the dip in the stock.

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Nvidia Reported Better-Than-Expected Q2 Earnings

Nvidia reported revenues of $46.74 billion in its fiscal second quarter, up 56% year-over-year, and ahead of the company’s guidance as well as consensus estimates. It was the ninth consecutive quarter in which the company’s revenues rose by over 50% annually. While last quarter’s growth was the lowest among these quarters, it occurred at a time when the company was unable to ship its H20 chips to China.

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Meanwhile, while Nvidia’s overall revenues came in ahead of estimates, its data center segment, which is now its biggest segment by a big margin, fell slightly short of estimates. The company guided for revenues of $54 billion at the midpoint for the fiscal third quarter, which was higher than the $53.1 billion that analysts were expecting. Importantly, the guidance does not assume any H20 sales to China in the current quarter, while some China revenues might have been built into analysts’ estimates.

Nvidia’s adjusted earnings per share of $1.05 also came in ahead of the $0.94 that analysts were modeling, and the company predicted an expansion of its gross margins in the current quarter.

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Other Key Takeaways from Nvidia’s Earnings

Here are the other key takeaways from Nvidia’s Q2 earnings.

China Remains a Wild Card for Nvidia

China was expectedly the focus during Nvidia’s fiscal Q2 earnings call since the company was barred from exporting the H20 chip to the country in the quarter. While the U.S. government has since allowed exports to resume, pending a revenue-share deal, there is still a lot of uncertainty over the company’s China business. CFO Colette Kress said that Nvidia is “still waiting on several of the geopolitical issues going back and forth between the [U.S. and Chinese] governments and the companies trying to determine their purchases and what they want to do.” Nvidia said that it could ship H20 chips worth between $2 billion-$5 billion this quarter in China, subject to regulatory clearances. However, it added that it could ship more if there is higher interest from Chinese customers or if more licenses are issued by the U.S. government.

CEO Jensen Huang also weighed in on the China business and reiterated his previous comments that the Chinese market is a $50 billion opportunity for the company this year. He added, “And if it’s $50 billion this year, you would expect it to grow, say, 50% per year.”

Huang termed bringing its Blackwell chips to China a “real possibility.” The Nvidia CEO added, “We just have to keep advocating the sensibility of and the importance of American tech companies to be able to lead and win the AI race and help make the American tech stack the global standard.”

AI Growth Story

The Nvidia and artificial intelligence (AI) growth story is far from over. Huang pointed out that the capex of large hyperscalers has doubled over two years to $600 billion, and several new AI startups are being funded, increasing the funnel for its chip sales. The company sees global AI infrastructure spend to rise to between $3 trillion and $4 trillion by the end of this decade.

While Huang has been upbeat on the AI revolution for the last two years, he was particularly optimistic about the long-term story during the Q2 earnings call and said, “And so I think the next several years, surely through the decade, we see just a really fast growing, really significant growth opportunities ahead.”

According to Huang, “physical AI has arrived, unlocking entirely new industries in robotics, industrial automation.” He talked about a “new industrial revolution” while stressing the “immense” opportunity for Nvidia from the AI pivot.

Why Should You Buy the Dip in NVDA Stock?

I believe that it makes sense to buy the dip in Nvidia stock as the company’s earnings and guidance don’t call for the stock to fall today. The AI euphoria looks far from over, and while Street estimates call for around 30% top-line growth next year, going by Huang’s commentary during the Q2 call, Nvidia’s actual growth might be much higher.

China remains a wild card, though, and any sales to that market would be incremental growth for Nvidia. From a valuation perspective, Nvidia trades at a forward price-earnings (P/E) multiple of just under 45x, which isn’t high for the kind of growth that the company brings to the table.

On the date of publication, Mohit Oberoi had a position in: NVDA. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com