NVIDIA's earnings report makes a grand entrance, potentially solidifying the strong upward trend of tech stocks

According to Zhitong Finance APP, NVIDIA (NVDA.US) will announce its Q1 fiscal year 2026 earnings report after the U.S. stock market closes on Wednesday. This global market capitalization leader in chip manufacturing is the last among major U.S. tech companies to release its earnings report, and its performance may provide a strong conclusion to the robust performance of large tech stocks during this earnings season. Data shows that since the earnings season for U.S. stocks began in mid-April, the Nasdaq 100 index has outperformed the S&P 500 index.

According to consensus analyst expectations, NVIDIA's Q1 revenue is expected to be $43.3 billion, compared to $26 billion in the same period last year; adjusted earnings per share are expected to be $0.88, compared to $0.61 in the same period last year.

Previously, the performance of Microsoft (MSFT.US), Meta (META.US), and several other large tech companies indicated that despite the uncertainty caused by U.S. President Trump's constantly changing tariff policies, market expectations for these tech giants remain solid. The combination of these earnings reports and the temporary easing of U.S.-China trade tensions has driven a strong rebound in tech stocks. Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder, stated, "Overall, the earnings performance of tech stocks is positive, with some even very impressive. I believe that if NVIDIA's performance continues to be strong, it will further consolidate the overall upward trend of tech stocks."

For NVIDIA's Q1 earnings report, the market is particularly focused on the supply situation of its Blackwell chips and profit margins. In February of this year, NVIDIA indicated that the cost increases brought about by the growth in Blackwell production capacity would drag down the gross margin for Q1. The company's Chief Financial Officer Colette Kress stated at that time that the gross margin for Q1 would be around 71%, and it should recover to the "mid-70% level" by the end of the year.

Andrew Rocco, a stock strategist at Zacks Investment Research, stated, "We saw a decline in gross margin last quarter, and if it declines again this quarter, it could pressure the stock price. While I don't think there will be a huge surprise in this earnings report, there are still risks in the outlook guidance."

Additionally, due to the Trump administration's ban on NVIDIA's H20 chip exports to China, there is uncertainty surrounding this earnings report. Analysts at Morgan Stanley, led by Joseph Moore, pointed out in a research report released on Tuesday that there are significant differences in Wall Street's expectations regarding the impact of the relevant ban, which could lead to a "chaotic performance" in the quarter.

NVIDIA's stock price has risen over 40% since its low in April, as the company's largest customers have committed to continue investing heavily in artificial intelligence infrastructure. Microsoft and Alphabet (GOOGL.US) have pledged to further increase spending next year, and Meta has also raised its capital expenditure expectations due to strong momentum in AI-related demand. Together with Amazon (AMZN.US), these four tech companies are expected to reach nearly $330 billion in capital expenditures by 2026, a 6% increase from this year's estimated spending Rob Almeida, global investment strategist at MFS Investment Management, stated: "The fact that mega-cap companies still believe they cannot afford the consequences of not investing in AI is a very strong signal indicating their intentions for the next four quarters."

Meanwhile, NVIDIA has secured a large order from the Middle East. It is reported that Saudi AI company Humain plans to build an AI factory in Saudi Arabia in collaboration with NVIDIA. At the same time, NVIDIA CEO Jensen Huang announced that the company will export 18,000 top-tier AI chips to Saudi Arabia. Additionally, sources indicate that the Trump administration is considering an agreement that would allow the UAE to import over 1 million advanced NVIDIA chips, a quantity that far exceeds the restrictions imposed on AI chip regulations during the Biden era.

Despite a rebound in NVIDIA's stock price, the current valuation of the stock remains at a discount relative to expected earnings over the next 12 months. Data shows that NVIDIA's current price-to-earnings ratio is 29 times, lower than its five-year average of 40 times.

According to Krishna Chintalapalli, portfolio manager at Parnassus Investments, NVIDIA remains highly attractive as the biggest beneficiary of AI spending. He stated: "In the past three months, I have not seen any signs that the situation has dramatically changed. While the Chinese market is a factor, the deals in the Middle East indicate that there is widespread demand for NVIDIA chips outside of the U.S. and China."