Nvidia shares extended their winning streak, climbing 1.2% to near $222 after closing at a record $219.44 on Monday. The chipmaker's four-day advance reflects renewed investor confidence in AI infrastructure spending, with traders positioning ahead of the May 20 earnings report.
The stock's price-to-earnings ratio sits near 54, indicating high expectations for future profits. Bernstein analyst Stacy Rasgon noted that massive capital expenditures from hyperscalers—major cloud and platform companies—continue to drive demand for Nvidia's chips, calling the stock a pure play on AI infrastructure. He also flagged a recent divergence where Nvidia lagged behind some AI supply chain names.
Earnings Preview and Guidance
Nvidia guided first-quarter fiscal 2027 revenue to $78 billion, plus or minus 2%, with the company explicitly assuming no data center compute revenue from China. CEO Jensen Huang emphasized that customers are "racing to invest" in AI compute, while CFO Colette Kress highlighted an $11 billion sequential jump in data-center revenue driven by increasing demand for Blackwell chips as inference deployments accelerate.
Kress also noted expectations for further sequential revenue growth through calendar 2026, with supply agreements extending into 2027. Gross margins are expected to hover around 75%, a key metric for profitability.
Export Risks and China Exposure
According to Reuters, CEO Jensen Huang was excluded from President Donald Trump's delegation to China, which includes executives from Apple, Tesla, and Qualcomm. The White House is steering the visit toward agriculture, aviation, and trade events, while Nvidia's H200 chips approved for China have yet to find buyers. However, investors largely shrugged off the news, as Nvidia's guidance already accounts for no China data center revenue.
Prediction markets show a 97% probability that Trump lands in China on May 13, suggesting traders see little chance of last-minute changes. Fund managers are more focused on AI supply chain integrity than trade pacts, according to Reuters.
Bullish and Bearish Arguments
Bulls argue that demand for Blackwell and Rubin chips continues to outpace supply, with four major tech companies expected to invest around $600 billion in AI this year. This capex should keep GPU, networking, and data center systems tight, even if software profits lag. Bears point to funding pressure, power bottlenecks, export rules, and a stock price that leaves no room for error.
Shares of IREN dropped after the company announced a $2 billion convertible debt deal tied to its Nvidia AI infrastructure agreement. Morningstar analyst Luke Yang flagged the need for "tens of billions more funding," highlighting the rising cost of playing in the AI space.
Competitive Landscape
Early trading saw AMD, Broadcom, and TSMC's U.S.-listed shares decline, with chip ETFs SOXX and SMH also slipping. Alphabet's Google Cloud continues to expand rapidly, and its in-house AI chips have landed customers like Anthropic, giving major buyers leverage to reduce dependence on Nvidia over time.
The rally's logic is straightforward: investors view the upcoming earnings as a barometer for AI demand rather than just another quarterly report. The story remains intact if management demonstrates smooth Blackwell chip flows, provides clarity on Rubin, and maintains margins near 75%. However, pressure could mount if AI customers increase borrowing, power supply becomes constrained, or China access shifts from a minor issue to a significant political headache.
