Nvidia Earnings Preview: Could NVDA Stock Have Further to Run?

Nvidia Earnings Preview: Could NVDA Stock Have Further to Run?

Nvidia reports earnings on Wednesday, 26 August, with expectations for another major increase in profits, while a new $500 billion AI financing initiative could provide an additional long-term catalyst for NVDA shares.

Nvidia is due to report its latest earnings on Wednesday, 26 August, after the US market closes, and the announcement could create another major opportunity for traders and investors.

Current analyst forecasts point towards earnings per share (EPS) of $2.01, compared with approximately $0.99 in the comparable period last year. That would represent EPS growth of more than 100% year-on-year.

Despite this rapid earnings growth, Nvidia's share price performance has been considerably more modest. This difference between earnings growth and share price growth could indicate that the company's valuation has become more attractive, particularly if Nvidia can once again outperform expectations.

However, strong earnings growth does not automatically mean the shares are undervalued, and investors will also need to consider future guidance, AI spending and Nvidia's valuation premium.

Nvidia's $500 Billion AI Opportunity

One of the biggest developments ahead of earnings is Nvidia's newly announced partnership with some of Wall Street's largest financial institutions.

Nvidia is working with Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs and KKR to establish financing platforms designed to mobilise more than $500 billion of third-party capital towards AI infrastructure.

The money is expected to help finance AI data centres and computing infrastructure built around Nvidia technology. Importantly, this is not $500 billion of guaranteed Nvidia revenue. Instead, it could significantly increase the amount of capital available to companies wanting to purchase and deploy AI computing infrastructure.

Nvidia CEO Jensen Huang has indicated that Nvidia could potentially backstop up to around 25% of the financing, equivalent to as much as $125 billion, although individual commitments and deployment timelines have not yet been disclosed.

For investors, the significance is potentially enormous. Easier access to AI infrastructure financing could help support continued demand for Nvidia GPUs, networking products and software over the coming years.

Nvidia Fundamental Analysis

Fundamentally, Nvidia continues to appear strong.

The stock has a P/E ratio of approximately 33.87, while its forward P/E ratio of around 17.31 would suggest a substantially lower valuation if Nvidia delivers the expected increase in future earnings.

Based on the valuation assumptions used in this analysis, potential price targets include:

• Higher target: $428.70, representing approximately 95.63% upside

• Lower target: $323.91, representing approximately 47.81% upside

• Analyst target: $312.21, representing approximately 42.47% upside

These valuation-based targets suggest significant potential upside, although investors should remember that price targets depend heavily on Nvidia continuing to deliver exceptional earnings growth.

NVDA Technical Analysis

From a technical perspective, Nvidia has experienced another strong bullish move, helped by positive earnings and AI investment announcements across the wider technology sector.

However, this rally has pushed Nvidia towards overbought territory on the Relative Strength Index (RSI), while the share price has also moved above its upper Bollinger Band.

This could increase the possibility of a short-term pullback or consolidation before earnings.

Rather than necessarily signalling the end of the bullish trend, a retracement could see traders watching Nvidia's moving averages and previous resistance levels for potential areas of support.

If Nvidia subsequently delivers another earnings beat alongside strong forward guidance, the longer-term bullish trend could potentially resume.

Outlook for Traders and Investors

Nvidia enters its August earnings announcement with several major catalysts working in its favour.

Expected EPS growth of more than 100%, continued AI infrastructure spending and the newly announced $500 billion financing initiative all reinforce the longer-term argument that demand for Nvidia's technology remains strong.

For traders, however, the technical picture deserves attention. With Nvidia recently reaching overbought levels, a short-term pullback ahead of earnings would not necessarily be surprising.

For longer-term investors, the most important numbers may not simply be headline EPS. Attention should instead focus on Data Centre revenue, Blackwell demand, gross margins and Nvidia's future revenue guidance.

If Nvidia continues to beat expectations and demonstrates that global AI infrastructure spending remains strong, there could still be considerable room for further share price growth.

The biggest risk is expectations themselves. Nvidia is now expected to deliver exceptional growth quarter after quarter, meaning even strong numbers could disappoint investors if they fall short of increasingly ambitious forecasts.

Overall, NVDA stock remains one of the key shares to watch heading into earnings on 26 August, with the combination of rapidly growing profits and potentially hundreds of billions of dollars of additional AI infrastructure financing providing a powerful long-term investment narrative.