Will NVIDIA's financial report exceed expectations again next week? Focus on three key aspects - AI demand, Blackwell production capacity, and the Chinese market

As the release of NVIDIA's quarterly financial report approaches, market attention is once again focused on the performance of this AI chip giant.

According to Chasing Wind Trading Desk, NVIDIA will announce its Q2 results for the fiscal year 2026 after the U.S. stock market closes on August 27, Eastern Time, followed by a conference call at 5 PM. Morgan Stanley's latest research report has raised NVIDIA's Q2 revenue forecast from the previous $45.2 billion to $46.6 billion, exceeding Wall Street's consensus expectations. This adjustment stems from the judgment of improvements on both the supply and demand sides—demand has continued to rise throughout the quarter, while the alleviation of supply bottlenecks for Blackwell chips has supported revenue growth.

The market is full of expectations for this financial report, with core focus areas concentrated on the changes in AI chip demand structure, the ramp-up of Blackwell chip production capacity, and the progress of the resumption of the Chinese market. According to CCTV News last month, the U.S. has approved the sale of H20 chips to China.

Morgan Stanley has raised NVIDIA's EPS for the fiscal year 2027 by about 4%, which directly pushed the target price up slightly from $200 to $206. Based on Wednesday's closing price of $175.4, this implies an upside potential of about 17.4%. So far this year, NVIDIA's stock price has risen by more than 30%.

Demand Shifts from "Supply Shortage" to "Sustained Growth"

Morgan Stanley's report indicates that customer demand for NVIDIA's products can be described as "significant, unmet, and enormous," with comments from large-scale enterprises showing a clear shift—from focusing on supply constraints at the end of last year to emphasizing the surge in inference demand recently.

Leading companies such as Amazon, Google, and Meta have all stated that even with continued investments in data centers, it is still difficult to fully meet computing power demands, and this supply-demand gap provides a solid foundation for NVIDIA's revenue growth.

More notably, the expansion of the demand structure is becoming an undeniable force, with secondary cloud providers and sovereign customers emerging as significant contributors. For example, CoreWeave plans to allocate half of its capital expenditure for the second half of the year in the fourth quarter, indicating that the rise of such customers means NVIDIA's sources of demand are spreading from a few leading enterprises to a broader group.

Blackwell Production Capacity as a Key Variable

The pace of improvement on the supply side will directly impact NVIDIA's short-term performance. Morgan Stanley points out that the ramp-up of Blackwell's production capacity is a core focus, with ODM manufacturers like Hon Hai expected to double their rack shipments within the year, and the top four manufacturers' rack production is expected to double in the third quarter Deutsche Bank's latest research report points out that Blackwell chips can achieve revenue of $24 billion in the first quarter, nearly doubling from $11 billion in the fourth quarter of last year. This growth momentum successfully compensates for the revenue loss caused by issues related to the Chinese market—this loss is estimated to be around $8 billion in the second quarter earnings guidance.

Given the capacity expansion of Blackwell, Deutsche Bank expects NVIDIA's revenue in the second fiscal quarter to reach approximately $46 billion, a year-on-year increase of 53%, slightly exceeding Wall Street consensus expectations.

The alleviation of back-end testing bottlenecks also supports capacity release. Morgan Stanley stated that the delivery cycle for Advantest testing instruments has shortened, and the B200/300 units tested by KYEC are expected to increase from 1 million in the second quarter to 1.5 million in the third quarter.

In terms of product structure, although Hopper production has ceased, there is still strong demand for it in the cloud market; B200 servers have considerable sales due to a more mature supply chain, although this may sacrifice some ASP. With the launch of B300 and an increase in the proportion of rack products, there is hope for a slight boost to the average selling price.

Can High Market Share Continue? Resumption of the Chinese Market May Open Growth Space

Morgan Stanley expects NVIDIA to maintain about 85% market share in 2026, significantly ahead of competitors like AMD.

Its competitive advantage is not only reflected in hardware performance but also stems from the software ecosystem and service barriers built by over $5 billion in annual R&D investment. In contrast, AMD's rack-level solutions lag in key technologies, and the performance gap remains an insurmountable obstacle.

Companies like Google, which originally relied on ASICs, are expected to increase their spending on NVIDIA by more than three times this year, a trend that confirms NVIDIA's irreplaceability in mainstream AI workloads. With the iteration of technologies like NVLink, its leading position in the high-end market is unlikely to be shaken in the short term.

Additionally, the market is highly concerned about whether NVIDIA can obtain permission to resume shipments to China.

Deutsche Bank's report indicates that if the permission is granted, NVIDIA's revenue in the third fiscal quarter is expected to increase by $50 billion (slightly lower than Wall Street consensus of $53 billion), and including the shipment of AI GPUs to China in the 2026 calendar year expectations, even if a 15% "licensing fee" needs to be paid to the U.S. government, the company's earnings per share could still increase by 10% (currently about $6). According to official news from the Ministry of Commerce of China last month, the U.S. side has actively indicated that it will approve the sale of NVIDIA H20 chips to China.

Despite the positive performance and strategy, Deutsche Bank maintains a "Hold" rating on NVIDIA, with a target price of $155, below NVIDIA's current stock price. The reason is that based on an upward expectation of about $7 for the 2026 calendar year, the current stock price corresponds to a price-to-earnings ratio of 25 times, which is within a reasonable valuation range