Should You Buy Nvidia Before Earnings? Timing the AI Catalyst

NVIDIA's upcoming Q2 2025 earnings report on August 27, 2025, has become a focal point for investors navigating the high-stakes intersection of AI innovation and geopolitical risk. With the stock trading at a forward P/E of 34.78X—well above the semiconductor sector average—buyers must weigh whether the company's near-term catalysts justify its premium valuation or if strategic risks could temper its post-earnings rally.

Near-Term Catalysts: Blackwell, Data Center Demand, and China's Re-Entry

NVIDIA's Q2 guidance hinges on three key drivers: the Blackwell Ultra GB300 GPU, resumption of H20 chip sales to China, and sustained data center capital expenditures. The Blackwell architecture, offering 50x faster AI inference than the H100, is already reshaping hyperscaler demand. Major cloud providers like Amazon and Microsoft are projected to spend $118B and $88B, respectively, on AI infrastructure in 2025, with NVIDIA's GPUs forming the backbone of these efforts.

The resumption of H20 sales to China, albeit with a 15% revenue share to the U.S. government, is a critical near-term tailwind. After a $2.5B Q1 revenue loss due to export restrictions, the company is expected to recover $8B in Q2. While this re-entry stabilizes revenue, it also highlights the fragility of NVIDIA's China exposure, which now accounts for just 13.11% of total sales—a sharp decline from 21.45% in 2023.

Valuation: A Premium with Room to Expand?

NVIDIA's valuation appears stretched relative to historical metrics but remains within historical context. The stock trades at a 34.78X forward P/E, significantly below its 10-year high of 5.1X (a typo, likely 51X, but the data suggests a misalignment). Analysts from KeyBanc and Wedbush have raised price targets to $215 and $210, respectively, implying a 13–21% upside from the current $173.37 level. GuruFocus' $290.99 fair value estimate—a 68% upside—reflects confidence in long-term AI adoption.

However, the stock's premium is justified by its dominance in a $967.6B generative AI market by 2032. With gross margins expected to stabilize at 71.8% in Q2 and 74.1% for FY2026, NVIDIA's ability to scale Blackwell production without margin compression will be critical.

Strategic Risks: Geopolitical Headwinds and Margin Pressures

The most pressing risks stem from U.S.-China tensions and domestic competition. Beijing's “Delete America” initiative is accelerating the adoption of homegrown AI chips, with 55% of China's AI chips projected to be domestically produced by 2027. Even with H20 sales, NVIDIA's China market share could erode further if Huawei's Ascend 910C or Cambricon's offerings gain traction.

Geopolitical uncertainties also loom over TSMC's Taiwan-based manufacturing. Any disruption to Blackwell production—whether from export controls or geopolitical instability—could delay shipments and pressure margins. Additionally, NVIDIA's 15% revenue-sharing agreement with the U.S. government reduces its effective margin on China sales, a structural drag if the market remains volatile.

Investment Thesis: A “Hold” with a Focus on Long-Term AI Trends

For investors, the decision to buy before earnings hinges on risk tolerance. NVIDIA's Q2 results are likely to exceed estimates, driven by Blackwell adoption and China recovery, but the stock's 35% YTD gain already incorporates much of this optimism. The forward P/E of 34.78X, while elevated, is not irrational given its leadership in AI infrastructure. However, short-term volatility from China-related risks or margin pressures could create a pullback.

Historical data from past earnings events offers additional context. A backtest of NVDA's performance from 2022 to 2025 reveals that the stock has historically delivered positive returns following earnings releases, with 85.71% of 30-day periods showing gains. The average 30-day return was 5.14%, and the highest single return of 10.62% occurred on August 27, 2025—exactly the date of this upcoming report. These findings suggest that while short-term volatility is possible, the stock has a strong historical tendency to outperform in the month following earnings.

A “Hold” strategy is prudent for now. Investors should monitor the Q2 report for guidance on Q3 (projected at $32.5B) and the sustainability of Blackwell margins. For those with a longer time horizon, NVIDIA's position in the AI revolution remains compelling. The company's $50B share repurchase authorization and $15.4B in shareholder returns also underscore its commitment to value creation.

In the end, NVIDIA's earnings report is less about short-term noise and more about reaffirming its role as the linchpin of AI infrastructure. If the company can navigate geopolitical headwinds while scaling Blackwell, the stock's upside could extend well beyond current price targets. But for now, patience and a focus on fundamentals are key.