Nvidia's Q2 Earnings to Watch: $8 Billion China Drag and ETF Implications

Nvidia's Q2 earnings report is expected to be heavily influenced by the $8 billion impact of US chip-export restrictions to China. The company's significant presence in semiconductor ETFs, such as VanEck Semiconductor ETF, iShares Semiconductor ETF, and Invesco PHLX Semiconductor ETF, could lead to volatility in these funds. Nvidia's performance tends to lead the way for its industry, so a significant China disappointment may impact peers such as AMD, Broadcom, and Marvell Technology.

Nvidia Corporation (NVDA) is set to release its second-quarter fiscal 2026 earnings after the market closes on Wednesday, August 27. Analysts expect the company to report adjusted earnings per share (EPS) of $1.02 and revenue of $46.45 billion, representing a 50% year-over-year (YoY) increase [1]. However, the earnings report is expected to be heavily influenced by the $8 billion impact of US chip-export restrictions to China.

Despite the strong outlook, Nvidia faces potential headwinds from China export curbs, which could result in an $8 billion hit. The company has reportedly told suppliers to suspend production of its H20 chip due to security concerns raised by Beijing [3]. This move is expected to impact the company's revenue, particularly in its data center business, which has been a primary growth engine.

Analysts remain bullish on Nvidia's prospects. Twelve out of 13 Wall Street analysts call the stock a "buy," with price targets ranging from $155 to $225 [1]. UBS analyst Timothy Arcuri recently raised his price target to $205 from $175, citing strong demand signals and projecting another beat in the upcoming Q2 earnings report [2].

Nvidia's strong performance is driven by the continued strength in its Data Center business, which benefits from the increasing adoption of cloud-based solutions and the growing hybrid working trend. The company's AI chips, including the A100, H100, B100, B200, and GB200, are the top choices for building and running powerful AI applications, positioning Nvidia as a leader in the generative AI market [1].

Nvidia's significant presence in semiconductor ETFs, such as VanEck Semiconductor ETF, iShares Semiconductor ETF, and Invesco PHLX Semiconductor ETF, could lead to volatility in these funds. A sudden shift in Nvidia's earnings could pull these baskets, along with other tech funds such as Invesco QQQ Trust (NASDAQ:QQQ) and Technology Select Sector SPDR Fund (NYSE:XLK) [3].

Nvidia's performance tends to lead the way for its industry. If Wednesday's report validates a significant China disappointment, investors may rotate out of high-exposure names such as Advanced Micro Devices Inc (NASDAQ:AMD), Broadcom Inc (NASDAQ:AVGO) and Marvell Technology Inc (NASDAQ:MRVL), even if their China risk is lower [3]. While chipmakers with larger domestic footprints, such as Intel Corp (NASDAQ:INTC), might profit if tariff rhetoric becomes more significant.

In conclusion, while Nvidia faces potential challenges from China export curbs, the company's strong product portfolio and leadership in AI make it a compelling investment opportunity. Analysts' overwhelmingly bullish stance suggests that investors should closely monitor Nvidia's earnings report and the company's response to the China export curbs.

References:
[1] https://finance.yahoo.com/news/nvda-buy-nvidia-stock-aug-192124545.html
[2] https://www.ainvest.com/news/ubs-raises-nvidia-price-target-205-q2-earnings-2508/
[3] https://finance.yahoo.com/news/nvidia-halts-china-chip-production-as-beijing-warns-over-security-reports-say-11795741