Nvidia delivered a better-than-expected quarterly results Wednesday night, but a few blemishes in the report — at least in the eyes of the market — has shares of the leading AI chipmaker falling in extended trading. That’s all some investors need to book profits in a stock that’s nearly doubled off its April lows. Revenue grew 56% year over year to $46.7 billion, outpacing the $46.06 billion the Street was looking for, according to estimates compiled by data provider LSEG. Adjusted earnings per share (EPS) in the three months ended July 27 increased to $1.05, exceeding the consensus estimate of $1.01, LSEG data showed. Nvidia also announced its board approved a $6 billion increase to its share repurchase authorization. NVDA YTD mountain Nvidia’s year-to-date stock performance. Bottom line Nvidia delivered a strong but not impenetrable quarter. And with the weight of the broader AI trade on its shoulders, it’s hardly surprising to see the roughly 3% after-hours drop in the stock Wednesday night. Sure, the magnitude of the quarterly beat and upside to consensus guidance expectations may not be quite what Wall Street was looking for. And the revenues in Nvidia’s crucial data center segment were a tad light. But it’s clear that demand for Nvidia’s chips was strong in the fiscal 2026 second quarter and only stands to strengthen in the coming months and production of its newest chip — dubbed the GB300, part of the Blackwell generation — accelerates ahead of an all-new Rubin family of chips set to debut next year. Nvidia’s adoption of an annual product launch cycle makes it hard to keep up, but that’s a high-quality problem for investors. The GB300, which was announced in March, is an upgraded version of the GB200, which began to roll out last year before ramping up in 2025. Remarkably, Rubin is already in the fabrication phase, Nvidia executives said on the call. Why we own it Nvidia’s high-performance graphic processing units (GPUs) are the key driver behind the AI revolution, powering the accelerated data centers being rapidly built around the world. But Nvidia is more than just a hardware story. Through its Nvidia AI Enterprise service, Nvidia is building out its software business. Competitors : Advanced Micro Devices , Broadcom and Intel Most recent buy : Aug 31, 2022 Initiation : March 2019 “This year is obviously a record breaking year. I expect next year to be a record breaking year,” Nvidia CEO Jensen Huang said. Supporting this view, Huang called out that that capital expenditures from the top four U.S. cloud service providers alone is tracking to be about $600 billion this year. Huang doesn’t think it’s unreasonable that Nvidia will grow to be the beneficiary of a “significant part of that.” Again, that’s only on the top four CSPs, not to mention the enterprise companies building on premises data centers. Longer-term, Nvidia thinks AI infrastructure spend will likely to hit $3 to $4 trillion by the end of the decade. Huang believes that Blackwell and Rubin will provide a strong opportunity to scale into that massive spend. CFO Colette Kress called out a few main drivers of the growth in annual AI spending, including the evolution in the very nature of AI computing less than three years since the launch of ChatGPT. The advent of reasoning agentic AI — in simple terms, these are AI systems that take time to chew on a task before taking an action — requires “orders of magnitude more training and inference compute,” Kress said. Additionally, Kress cited the global buildout of sovereign AI infrastructure outside the U.S., enterprise AI adoption and “the arrival of physical AI and robotics.” The profit-taking Wednesday night does not change the fact Nvidia still has a massive opportunity to keep growing as it supports the worldwide effort to build AI data centers, which Nvidia likes to call AI factories because they manufacture intelligence. We’re also fully aware that with Nvidia’s guidance, better than expected has simply become the default expectation. So while we once again saw Nvidia’s revenue forecast for the current period come in north of the consensus estimate, some investors were likely looking for an even rosier guide — the so-called whisper number on Wall Street. Plus, Nvidia’s guidance does not include any contribution from sales of its H20 chip to Chinese customers given the geopolitical uncertainty that still remains despite the Trump administration’s decision to walk back its April export ban. Management said on the call that there’s customer interest in the chips and the supply is there. If the China situation gets more favorable for Nvidia, its guidance could prove conservative. Given the results and what we heard on the call, we continue to view Nvidia as an “own it, don’t…
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