Nvidia will report its second-quarter (Q2) earnings for the fiscal year 2027 on August 26, and expectations are high. As we await earnings, we need to consider two important things about the stock.
The first thing is that the stock dropped on the day following earnings in each of the last four quarters, despite strong results. It is starting to look like a pattern.
The second thing is that, according to MarketBeat, 52 of the 54 analysts covering Nvidia stock rate it a buy. Two give a hold rating. The average price target is $308.01.
Nvidia closed at $214.72 on August 21, implying a compelling 43.45% upside.
Given that the stock often drops despite strong earnings and that analyst consensus is a buy with significant upside, the question naturally arises: buy before earnings, or wait until after earnings and buy on the dip the next day?
That is a tough question to answer. In a research note shared with me, Goldman Sachs analyst James Schneider and his team outlined their views on what might happen and what to watch for.
Goldman Sachs expects a solid Q2 for Nvidia with meaningful upside to guidance
Schneider expects “a solid quarter with meaningful upside to guidance supported by tight GPU supply/demand trends.”
The caveat here is that, as the stock soared in August, this might already be priced in. He noted this by saying that the bar for the stock is elevated, given its more than 12% move in two weeks.
He reiterated a buy rating for Nvidia and a price target of $285, based on a 30x multiple.
The analysts noted that their EPS estimates for Q2 and Q3 are 6% and 12% above the Wall Street consensus.
So, despite the above-consensus EPS estimates, Goldman Sachs’s price target is slightly below the average, but still implies a big upside of 32.73%.
Schneider’s team believes that Nvidia stock trades at a steep discount to what they view as fair value. The analysts added that the stock could continue to re-rate, and three factors could help.
They need to see improving profitability metrics at hyperscalers, which would support sustained spending growth.
Nvidia needs to demonstrate measured capital outlays in support of customer financing platforms. This would ease fears about vendor/circular financing.
The company also needs to reiterate its commitment to strong buybacks and dividends.
The team said they will look for five things during the Nvidia earnings call that could move the stock:
- Details on the customer financing platform and its impact on capital allocation
- Details of the Vera Rubin AI platform rollout, or Rubin ramp, in the second half of 2026
- Gross margin trends and input costs
- CPU demand driven by Agentic AI
- Competitive trends
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The twist is that Nvidia GPU demand creates stock risk
The insatiable demand for Nvidia GPUs is a double-edged sword, as Nvidia is facing supply constraints.
This is making it more difficult for Nvidia to beat and raise every quarter. Additionally, while hyperscalers keep raising their capital expenditure plans, it is not certain they will do so midyear, which is not good for the next two quarters.
For Nvidia to soar after earnings, it would need to drop something material, beyond a standard beat-and-raise.
Nvidia significantly increased dividends in its previous earnings report, but that didn’t prevent the next-day drop, even as Bank of America raised its price target.
Another part of the twist is that the huge demand driving GPU prices higher and higher, as well as other components of the AI boom, is putting too much pressure on some of Nvidia’s customers’ financials. With very significant customers having trouble financing their insatiable demand, fears of vendor financing are growing, and Nvidia’s commitments are not helping ease them.
Related: Michael Burry says Nvidia rival is quietly getting serious
On August 17, Nvidia agreed to provide a guarantee of up to $105 billion to help OpenAI lease a data center in Ohio that is being developed by SoftBank-owned SB Energy, Reuters reported. Nvidia said it will guarantee a portion of the lease and power payments and commit to ensuring the site retains a minimum value.
On August 10, Nvidia teamed up with Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs, and KKR to create AI Compute Infrastructure Financing Platforms. The idea behind this project is to mobilize over $500 Billion of third-party capital.
This platform is the one Goldman Sachs wants addressed on the earnings call.
So, if we read a little between the lines, the twist is that while Goldman Sachs sees Nvidia hitting $285 in the next 12 months and forecasts a beat-and-raise, Nvidia is more likely to dip the day after than to soar, unless it drops a big piece of news.
A fairly similar sentiment is shared by Morgan Stanley analysts.
So what should you do as an investor? A long-term investor will likely see meaningful upside and buy it now. A more tactical trader will wait to buy on the dip.
Analysts noted downside risks for Nvidia stock:
- Hyperscalers could slow down their AI infrastructure spending.
- Nvidia could lose market share due to increased competition.
- Nvidia could suffer erosion of its profit margins due to increased competition.
- Supply constraints
Related: Bank of America’s latest Nvidia alert is a must-read for worried investors
