Should You Buy Nvidia Stock Before Aug. 27? Assessing Catalysts, Risks, and Valuation in the AI Era

Nvidia (NVDA) stands at a pivotal crossroads as it prepares to report Q3 2025 earnings on August 27, 2025. With the stock trading at a lofty P/E ratio of 58.36x and a PEG ratio of 1.8x, investors are grappling with a critical question: Is the current valuation justified by the explosive growth of AI-driven demand, or does it reflect overoptimism in the face of geopolitical headwinds and valuation risks? This article dissects the catalysts, risks, and valuation dynamics to determine whether Nvidia remains a compelling buy ahead of its earnings report.

The Earnings Catalyst: AI Momentum and Revenue Growth

Nvidia's Q3 2025 earnings will serve as a barometer for the AI revolution's momentum. Analysts project revenue of $33.29 billion, a 17% sequential increase and a 94% year-over-year surge, driven by the Data Center segment. This segment, now accounting for 85% of total revenue, is fueled by demand for AI infrastructure, with the Blackwell platform (B200 and B300 GPUs) expected to contribute several billion dollars in its first quarter.

The GAAP earnings per share (EPS) for Q3 are forecasted at $1.01, up from $0.78 in Q2 2025. This growth is underpinned by strong gross margins (75.7% non-GAAP) and a $50 billion share repurchase program, which has bolstered investor confidence. A reveals a 120% rally since January 2025, outperforming the S&P 500 by 80 percentage points.

However, the key metric to watch is Data Center revenue growth. If the segment exceeds $29.28 billion (as projected), it would validate the thesis that AI infrastructure is a secular growth driver. Conversely, a miss could signal slowing demand or margin pressures from rising R&D costs.

Valuation: High Multiples in a High-Growth Era

Nvidia's valuation appears stretched by traditional metrics. At a P/E ratio of 58.36x and an EV/Revenue multiple of 28.95x, the stock trades at a premium to peers like AMD and Intel. A discounted cash flow (DCF) model suggests the stock is overvalued by 54% at its current price of $177.99, assuming a 7% discount rate and 2030 free cash flow of $210.2 billion.

Yet, these metrics fail to account for secular tailwinds. The Data Center segment is projected to grow at 35% annually through 2028, with AI infrastructure demand expected to reach $1.2 trillion by 2030. Nvidia's economic moat—bolstered by CUDA's software ecosystem, Blackwell's performance, and a 80% market share in AI chips—provides a durable competitive advantage.

A highlights the divergence: While the S&P 500 trades at 22x, Nvidia's multiple reflects its role as a growth engine in the AI revolution. For investors with a long-term horizon, the question is whether the company can sustain its earnings momentum and reinvest cash flows into next-gen technologies like Rubin (the successor to Blackwell).

Geopolitical Risks: China's Uncertain Role

The most pressing risk for Nvidia is its exposure to China's AI market, which could swing between a $20 billion tailwind and a $50 billion headwind depending on regulatory shifts. Recent developments include:
1. U.S. Export Controls: The Trump administration's 15% revenue-sharing agreement for H20 chip sales to China has reduced profitability but preserved access to the market.
2. Chinese Regulatory Scrutiny: The Cyberspace Administration of China (CAC) has raised security concerns about the H20, prompting tech firms like Alibaba and Tencent to halt new orders.
3. Domestic Alternatives: Huawei's Ascend 910D and Cambricon's 7nm chips are gaining traction, with China's self-sufficiency initiatives aiming for 55% domestic AI chip usage by 2027.

A illustrates the threat: While U.S. firms held 90% of the market in 2023, domestic alternatives are projected to capture 55% by 2027. This shift could erode Nvidia's revenue growth if China's push for self-reliance accelerates.

Investment Thesis: Buy, Wait, or Avoid?

Buy Case:
- Earnings Beat Potential: A Q3 revenue beat of $35.1 billion (as in Q2) would validate AI demand and justify the high valuation.
- Blackwell Adoption: Strong uptake of B200/B300 GPUs could offset China-related risks and drive long-term growth.
- Shareholder Returns: The $50 billion buyback program and $34.8 billion cash reserves signal management's confidence in the stock's intrinsic value.

Sell Case:
- Valuation Concerns: A DCF model suggests the stock is overvalued by 54%, and a 10% drop in Data Center revenue could trigger a 20% correction.
- Geopolitical Volatility: A ban on H20 sales or a surge in domestic alternatives could reduce China's contribution to revenue by $20 billion annually.

Neutral Considerations:
- Macro Risks: A delay in Fed rate cuts (core PCE inflation at 2.7% as of June 2025) could weigh on high-growth tech stocks.
- Execution Risks: The Blackwell-to-Rubin transition could disrupt supply chains or delay product launches.

Conclusion: A Calculated Bet on AI's Future

Nvidia's stock is a high-conviction play for investors who believe in the AI revolution's long-term potential. The August 27 earnings report will provide critical insights into whether the company can maintain its 94% YoY growth trajectory. While the valuation is elevated, the combination of secular growth, a durable moat, and aggressive buybacks creates a compelling case for a buy ahead of the report—provided investors are prepared to weather short-term volatility from China-related risks.

For a more conservative approach, consider waiting for the earnings results and subsequent guidance. If Q3 revenue exceeds $35 billion and Data Center growth accelerates, the stock could rally 15–20% post-earnings. Conversely, a miss or negative China-related news could trigger a pullback, offering a more attractive entry point.

In the end, Nvidia's stock is a microcosm of the AI era: high rewards for those who bet on innovation, but with risks that demand careful monitoring. As the world's leading AI infrastructure provider, its success will shape not just its own future, but the trajectory of the entire industry.