NVIDIA’s sell-off may cause a knee-jerk reaction in other AI stocks

Tiger_James Ooi
08-29

Quick Thoughts on $NVIDIA(NVDA)$ Earnings:

$NVIDIA(NVDA)$ nvdaQ2 FY2026 Results:

  • Data Center Revenue: $41.1 billion vs. $41.3 billion estimated — a slight miss of 0.5%

  • EPS: $1.05 vs. $1.01 estimated — a soft beat of 3.9%

  • Total Revenue: $46.74 billion vs. $46.07 billion estimated — a soft beat of 1.5%

Q3 FY2026 Guidance:

  • Revenue: $54.0 billion vs. $53.4 billion estimated — guidance assumes no China chip sales

  • Gross Margin (GAAP / non-GAAP): 73.3% / 73.5%

  • Nvidia fell nearly 3% in after-hours trading on a modest earnings beat and a muted outlook.

  • Q3 FY2026 guidance is uninspiring as it excludes H20 chip sales to China. There could be upside to earnings if Nvidia secures approval to sell newer or H20 chips into China, but US export restrictions and Beijing’s discouragement of U.S. chip purchases remain key risks.

  • Gross margins came in higher than expected, suggesting the GB200 platform carries stronger profitability. As production ramps, investors may see further bottom-line growth.

  • CEO Jensen Huang continues to highlight strong demand for Nvidia products. If demand is not the issue, the focus shifts to execution. A successful Blackwell production ramp, combined with rising hyperscaler capex, could re-accelerate both revenue and earnings growth.

  • Revenue growth has normalized from a peak of 265% YoY in Q4 FY2024 to a forecast of 52% YoY in Q3 FY2026. Nevertheless, Nvidia remains among the fastest-growing large-cap companies.

  • Key risks remain with China sales uncertainty, US tariffs, hyperscaler capex slowdown, and potential production delays.

  • $NVIDIA(NVDA)$ ’s sell-off may cause a knee-jerk reaction in other AI stocks, but it should not lead to a broad valuation reset. AI capex continues to rise, adoption is accelerating, monetization is expanding, and overall sector valuations remain undemanding.

  • Overall, this was still a solid earnings report. The after-hours weakness seems unwarranted and likely reflects nervy investors reacting to the softer outlook.

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Waiting Game: Nvidia at Highs, Add at $170 or Wait $150?
Nvidia’s Q2 revenue rose over 55%, but revenue in China dropped sharply by 24%, wiping out $93B in market value. After the last earnings report, Nvidia pulled back and consolidated before breaking to new highs, eventually climbing to $180. This time, the earnings aren’t actually bad — the recent surge just front-loaded the gains. 1. Is $170 the start of Nvidia’s new bull market, or should we wait for a pullback to the $150 support level? 2. What’s your choice — is it ever too late to buy Nvidia? 3. How will AVGO affect Nvidia stock price?
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