NVDA Post-Earnings Outlook: Can AI’s Biggest Winner Keep Soaring?

Nvidia’s Q2 fiscal 2026 earnings report on August 27, 2025, extended the company’s track record of outperforming Wall Street estimates, but market response reflected a shift in investor sentiment. Despite a 56% year-over-year revenue surge to $46.74 billion—beating estimates of $46.06 billion—and adjusted EPS of $1.05 versus $1.01 expected, the stock fell 4% in extended trading. This reaction marked a break from the sharp post-earnings rallies of recent quarters and highlighted rising caution around AI infrastructure spending, persistent China trade barriers, and tempered forward guidance.

Richmond Lee, CFA and Senior Market Analyst at PU Prime, commented:

Nvidia’s share price outlook for the upcoming Q3 FY2026 (ending October 2025) reflects a mix of robust fundamentals and rising risks. Nvidia’s Q2 FY2026 earnings, with $46.74 billion in revenue (up 56% YoY) and $1.05 EPS, beat expectations, but the stock’s 4% post-earnings dip signals investor caution amid high valuations (likely 40-50x forward P/E). Q3 guidance of $54 billion (+/- 2%) aligns with consensus, suggesting growth stabilization rather than the explosive beats of prior quarters. This tempering, coupled with no H20 chip sales to China due to export restrictions, caps near-term upside.

Nvidia’s 67% AI accelerator market share and Blackwell’s 17% sequential growth underpin analyst optimism—60 of 67 analysts rate Buy/Strong Buy with a $206.54 average target, implying 18% upside from the current $174.18. However, risks loom: China’s revenue gap ($2-5 billion potential), AMD’s rising competition (47% YTD gains), and concerns over AI ROI (95% of firms report none) could pressure shares. A $165-$195 trading band seems likely, with catalysts like China trade progress or Blackwell execution critical. Long-term, the $3-4 trillion AI TAM and Vera-Rubin’s 2026 launch bolster Nvidia’s edge, but short-term volatility warrants cautious position sizing

Short-Term Market Reaction and Drivers

Following the release, Nvidia shares initially dropped to $175 in after-hours trading before recovering slightly to $180.17 by August 28, reflecting a mild decline of 0.78% from the prior close. Options markets had priced in a 6.2% post-earnings move, yet the result was well within expectations, underscoring waning enthusiasm even amid another headline beat.

The main contributor to the cautious response was Nvidia’s announcement that it generated no H20 chip sales to China in Q2. This gap emerged from tightened export restrictions and removed a previously reliable revenue stream. The data center segment—a core component of Nvidia’s AI growth thesis—also underwhelmed. While revenue from this unit rose 56% YoY to $41.1 billion, it missed StreetAccount estimates of $41.34 billion, the second consecutive quarter of underperformance.

Adding to the market’s measured stance, Nvidia’s Q3 revenue guidance of $54 billion (+/- 2%) aligned with expectations but did not exceed them. This marked a shift from prior quarters when Nvidia consistently surprised to the upside. The in-line outlook signaled that the explosive momentum seen earlier in 2025 may be plateauing.

Analyst Reactions and Revised Price Targets

Despite the muted reaction, major investment banks reaffirmed bullish long-term views. Goldman Sachs maintained its $200 price target and Buy rating, acknowledging that high investor expectations limited upside surprise. JPMorgan raised estimates, citing continued strength in AI demand from hyperscalers. Citigroup reiterated a Buy rating and a $190 target, noting Nvidia’s dominant 67% market share among AI accelerators used by top U.S. hyperscalers.

Morgan Stanley lifted its target from $170 to $200, pointing to strong non-hyperscaler demand and improved supply chain conditions. Bank of America remained most bullish, maintaining a $220 target, citing enduring AI infrastructure demand. As of late August, the consensus among 67 analysts was overwhelmingly positive: 49 Strong Buys, 11 Buys, six Holds, and one Strong Sell, with an average price target of $206.54—7.1% upside from current levels.

Intermediate-Term Outlook

In the weeks following the earnings report, Nvidia is expected to remain within a trading band of $165 to $195. The stock carries mixed technical signals, having formed a sell pivot on August 12, though moving averages remain in a bullish configuration. Analysts see the fair value around $180 in the near term, balancing earnings strength against geopolitical risk and rich valuation multiples.

NVDA recent price action. Source: TradingView

Key growth drivers include the ramp-up of the Blackwell architecture, which posted a 17% sequential revenue increase in Q2. Management emphasized accelerating Blackwell Ultra production, with demand expected to exceed original quarterly shipment forecasts of $3 billion.

Potential upside also hinges on progress with China trade negotiations. Nvidia executives hinted at a potential $2–5 billion in H20 sales if diplomatic channels open. Policy developments, including the Trump administration’s ongoing talks around chip sales to Chinese firms in exchange for a 15% revenue share to the U.S. government, could become a game-changer in Q4.

The broader AI capex cycle remains favorable. Alphabet is on track to raise its 2025 capex from $75 billion to $85 billion, maintaining robust demand for Nvidia’s GPUs. Other hyperscalers, including Microsoft, Amazon, and Meta, continue to aggressively invest in AI infrastructure.

However, sentiment may face pressure from broader macro and sector-specific concerns. The VIX hit a year-to-date low of 14.22, with Bank of America warning that current complacency around market volatility is “unsustainable” in the face of elevated AI valuations and central bank uncertainty.

Long-Term Outlook Through December 31, 2025

Nvidia’s structural tailwinds remain intact heading into year-end. CFO Colette Kress reaffirmed the firm’s bullish stance on the long-term AI opportunity, estimating a $3–4 trillion addressable market in infrastructure alone by decade-end. Nvidia is expected to capture a major share of that growth, especially with its 85% dominance in AI accelerator market share projected to hold into calendar 2026.

Further product innovation supports this outlook. The next-gen Vera-Rubin architecture has been taped out and is scheduled for 2026 launch, with expectations of 50% annual growth—well ahead of consensus forecasts. These roadmaps bolster confidence in Nvidia’s ability to lead the sector even as AMD and custom ASIC competition intensify.

Risks, however, remain significant. The unresolved China trade standoff continues to weigh heavily, with no current revenue from that region baked into Q3 guidance. Additionally, there’s growing concern over potential AI overinvestment. A recent MIT study revealed that 95% of surveyed companies have yet to realize tangible returns from AI projects, and OpenAI CEO Sam Altman has acknowledged the risk of a bubble forming in AI valuations.

Competition from AMD is growing, with AMD shares up 47% YTD versus Nvidia’s 33%, signaling market share challenges ahead. Meanwhile, elevated valuation levels—trading near the high end of historical multiples—have led some investors to question Nvidia’s capacity to maintain premium pricing in a rapidly evolving sector.

Correlated Asset Classes and Market Sentiment

Nvidia’s price action is increasingly intertwined with other key players in the AI and semiconductor ecosystem. Semiconductor peers including AMD, Broadcom, Intel, and Micron have seen varied gains, with Nvidia and AMD leading the PHLX Semiconductor Index (SOXQ), which rose 21% over the prior three months. Hyperscaler customers like Alphabet, Amazon, and Microsoft serve as both revenue sources and barometers for Nvidia’s AI chip demand.

SOXQ recent price action. Source: TradingView

AI software firms like Palantir also show high correlation, given their downstream application of Nvidia’s infrastructure. Broader market strength—evident in the S&P 500’s record close at 6,481.40 on earnings day—indicates Nvidia is influential but not singularly driving equity sentiment.

Valuation, Financials, and Price Scenarios

Analysts forecast full-year 2025 revenue of $111.3 billion, a remarkable jump from $26.97 billion in 2023. Margins remain strong, with expectations for non-GAAP gross margins in the mid-70% range. A $60 billion share repurchase authorization, announced without expiration, adds a supportive tailwind for EPS and price stability.

By year-end, price targets diverge depending on scenario assumptions:

• Bull Case ($220–$250): A resolution of China trade issues, strong Blackwell uptake, and sustained AI capex could drive shares toward the top of consensus ranges.
• Base Case ($190–$220): Continued execution with modest improvements in China revenue supports the current analyst consensus.
• Bear Case ($150–$180): Prolonged China headwinds, weakening AI enthusiasm, or a broader market correction could pressure shares to technical support levels.

Conclusion

Nvidia’s August 2025 earnings confirmed its leadership in the AI infrastructure space, but a cooling investor response highlighted elevated expectations and growing external risks. While the near-term picture reflects uncertainty—particularly regarding China and valuation pressures—the long-term thesis remains compelling.

Key catalysts for price direction through December include a potential China trade breakthrough, Blackwell ramp effectiveness, and overall sentiment around AI infrastructure profitability.

CEO Jensen Huang’s outlook remained confident: “This year is a record-breaking year, and I expect next year to be a record-breaking year as we race toward artificial super-intelligence.” For traders, Nvidia remains a top-tier AI growth play with short-term volatility but strong long-term tailwinds.