Nvidia's Earnings Crossroads: Why the AI Titan Remains a Buy Ahead of May 28

The clock is ticking for investors in NVIDIA (NASDAQ: NVDA) as the company prepares to report Q2 2025 earnings on May 28, a critical juncture for the AI infrastructure leader. With geopolitical headwinds, supply chain transitions, and $15 billion in lost China revenue looming, the question is: Does the stock's near-term risk outweigh its long-term AI dominance? The answer, based on Wall Street consensus, valuation dynamics, and strategic catalysts, is a resounding yes—now is the time to position for this AI revolution.

Near-Term Catalysts: Navigating Stormy Seas to Calm Waters

NVIDIA's Q2 results will be a litmus test for its ability to weather the U.S. export ban on H20 GPUs, which slashed Q1 revenue by $5.5 billion in inventory write-offs and left $15 billion in annualized sales at risk. Yet, the company's Blackwell architecture (B200) is emerging as the silver lining. Shipments of Blackwell-based NVL72 racks surged to 1,500 units in April, with projections of 4-5,000 units by Q2's end—a 3-4x sequential ramp. At a $3 million ASP, this could generate $13.5 billion in revenue, partially offsetting H20 losses.

Analysts are cautiously optimistic. The consensus calls for $39.3 billion in Q2 revenue (+51% YoY) and $0.87 EPS, with UBS's Timothy Arcuri noting that “Blackwell's adoption trajectory and potential export relief could drive a top-line beat.” While margins may dip temporarily due to lower-margin Bianca compute boards in early Blackwell systems, the long game is clear: Blackwell's scalability and AI software ecosystem will cement NVIDIA's lead.

Valuation: High Multiples, Higher Growth

At $131.29 per share on May 23 (post a slight dip from $132.83 on May 22), NVIDIA's valuation is steep but justified by its AI-driven moat. Key metrics include:

• Trailing P/E: 44.66 (vs. a 10-year average of 51.73), signaling a slight discount to historical norms.
• Forward P/E: 31.80, aligning with growth expectations of 32% revenue growth in FY2026.
• Price-to-Sales (P/S): 15.89 (forward), elevated but reasonable for a company capturing 70% of the $500B AI hardware market.

Even with a $3.2 trillion market cap, NVIDIA's $60.85 billion in free cash flow and $32.94 billion net cash provide a cushion. Analysts' average price target of $169.31 (a 28.96% upside) reflects confidence in Blackwell's full ramp and China's eventual regulatory thaw.

Wall Street Consensus: Buy Ratings Amid Volatility

Despite Q2's challenges, 78% of analysts rate NVDA a Buy/Strong Buy, with UBS, Morgan Stanley, and CFRA all reaffirming bullish stances. Key takeaways:

• Timothy Arcuri (UBS): Maintains a Buy with a $175 target, citing “Blackwell's 2026 margin upside” and “China's $50 billion AI market potential.”
• Angelo Zino (CFRA): Highlights NVIDIA's AI software stack dominance, including NVLink Fusion and partnerships with Taiwan's government, as irreplaceable advantages.

Critics argue the stock is overvalued given its 55.85% net profit margin and beta of 2.11 (volatile vs. the market). Yet, with AI adoption rates accelerating (e.g., Microsoft's $10 billion Azure AI spend), the risks are mitigated by sector tailwinds.

Why the Long-Term Bet Wins

NVIDIA's $15 billion annualized China revenue loss is temporary. Once Blackwell SKUs gain export approval—a possibility if Washington eases restrictions—the floodgates could reopen. Meanwhile, enterprise AI demand is exploding:

• Stargate Project: NVIDIA's AI supercomputing partnerships with governments and corporations are expanding, with Taiwan's Foxconn-led factory as a template.
• Software monetization: AI cloud services, training platforms, and partnerships with OpenAI/Anthropic could add $10 billion+ in recurring revenue by 2026.

Risks, but Manageable Ones

• Export Restrictions: A permanent ban on H20/Blackwell sales to China would hurt, but NVIDIA is pivoting to India, Southeast Asia, and Europe for growth.
• Competitor Threats: AMD's MI300X and Intel's Ponte Vecchio are laggards, lacking NVIDIA's software integration.
• Valuation Pullback: A P/S contraction to 12x from 15.89x would still leave room for growth.

Final Analysis: Buy Now, Reap Later

NVIDIA's May 28 earnings are a critical inflection point, but the stock's AI narrative remains intact. With Blackwell's ramp, China's eventual regulatory thaw, and $169 analyst targets, the risk-reward favors buyers. The stock's $131 price is a rare entry point before the “AI Everything” era hits full stride.

Actionable Takeaway: Initiate a position in NVDA at $131, with a $120 stop-loss, targeting $170+ by year-end. The AI train isn't slowing—NVIDIA is still driving it.

This analysis is for informational purposes only. Investors should conduct their own due diligence.