Is Now the Right Time to Buy Nvidia Before Its Earnings Catalyst on August 27?

Nvidia's stock has been a rollercoaster in 2025, oscillating between record highs and sharp corrections amid shifting regulatory landscapes and AI sector dynamics. With its Q2 FY 2026 earnings report due on August 27, investors are weighing whether the current pullback in shares—down 3.5% on August 19—presents an opportunity to buy into the AI juggernaut before its next catalyst. The key question: Can Nvidia's long-term growth potential in AI offset near-term valuation risks tied to China export regulations and geopolitical uncertainty?

Regulatory Headwinds and Financial Implications

The U.S.-China regulatory tug-of-war has reshaped Nvidia's business model. In August 2025, the resumption of H20 AI chip sales to China under a 15% revenue-sharing agreement with the U.S. government marked a partial thaw in tensions. However, this arrangement came at a cost. In Q1 FY 2026, Nvidia incurred a $4.5 billion charge due to new licensing requirements, dragging gross margins down to 60.5% from the expected 70.6%. While the company projects a recovery to 71.8% in Q2, the financial hit underscores the fragility of its China strategy.

The regulatory uncertainty also looms large. Legal challenges to the revenue-sharing agreement could disrupt future sales, and U.S. policymakers remain wary of China's AI ambitions. For investors, this means Nvidia's China exposure is a double-edged sword: a potential growth driver if the 15% fee proves sustainable, but a risk if geopolitical tensions escalate or the agreement is revoked.

AI-Driven Growth: A Fortress of Innovation

Despite these challenges, Nvidia's AI roadmap is unmatched. The Blackwell NVL72 supercomputer is now in full-scale production, while the Rubin architecture—set to debut in 2026—promises performance leaps. The company is also developing the B30A chip, tailored for the Chinese market, and expanding its AI factory partnerships, including a major project in Saudi Arabia with HUMAIN.

Nvidia's dominance in data centers—accounting for over 80% of its revenue—provides a stable foundation. Its partnerships with cloud giants like AWS, Google Cloud, and Microsoft Azure further cement its role as the backbone of global AI infrastructure. Analysts project Q2 revenue of $45.8 billion, a 52.4% year-on-year increase, driven by robust demand for AI compute.

Valuation: Premium Justified or Overdue for a Correction?

Nvidia's valuation metrics are eye-popping. A P/E ratio of 55.86, P/S of 29.21, and P/B of 51.02 place it well above historical averages and peers like AMD (P/E 94.29) and Intel (P/E -5.38). While these multiples reflect investor confidence in its AI leadership, they also raise questions about sustainability.

The stock's recent bearish RSI pattern at the $184 resistance level suggests weakening momentum. If Q2 earnings fall short of expectations, shares could retreat to the 50-day moving average support at $165. Conversely, a strong report could push the stock toward $196. Analysts remain cautiously optimistic, with 58 out of 65 ratings favoring “buy” or “strong buy,” and an average price target of $191.

Risks to Consider

1. Regulatory and Legal Risks: The 15% revenue-sharing agreement could face legal challenges or be deemed a precedent for stricter export controls.
2. Geopolitical Tensions: U.S.-China relations remain volatile, with the potential for sudden policy shifts.
3. Competition: Chinese AI models like DeepSeek are gaining traction, and rivals like AMD and Intel are closing the gap in AI chip performance.
4. Valuation Volatility: A P/E of 55.86 is high even for a growth stock, and a slowdown in AI adoption could trigger a re-rating.

Earnings Catalyst: What to Watch on August 27

The Q2 earnings report will be pivotal. Investors should focus on:
- Revenue Growth: Whether the $45.8 billion projection is met, particularly in the AI segment.
- Gross Margin Recovery: Progress toward the projected 71.8% margin.
- Guidance for Q3: Signs of sustained demand for Blackwell and Rubin.
- China Sales: Updates on H20 chip sales and the 15% fee's impact.

Investment Thesis

Nvidia's long-term prospects remain compelling. Its leadership in AI infrastructure, aggressive product roadmap, and expanding ecosystem of partnerships position it to capitalize on the AI boom. However, the current valuation reflects high expectations. For risk-tolerant investors, the pullback to $175–$180 could be an entry point, especially if Q2 results exceed forecasts.

Buy if:
- Earnings beat estimates, gross margins stabilize, and China sales show resilience.
- The stock holds above the 50-day moving average ($165) post-earnings.

Wait if:
- Earnings miss, margins decline further, or regulatory risks escalate.

In a market where AI is the new oil, Nvidia is the leading refiner. But like any high-growth stock, it demands patience and a tolerance for volatility. For those who believe in the AI revolution, now could be the time to buy—but with a clear-eyed view of the risks.