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Nvidia recovery rally faces a reality check. What investors should know
4 weeks agoLast Updated: May 27, 2025
0 1 5 minutes read
Two years ago this month, Nvidia shocked investors with sales guidance beyond anybody’s wildest dreams, accelerating the stock’s epic run. The seemingly unstoppable Club name hit turbulence earlier this year before clawing its way back into the green. The next test of its recovery rally comes Wednesday evening. The leading maker of artificial intelligence chips is set to release its fiscal 2026 first-quarter results after Wednesday’s closing bell. Once again, anticipation is high after an eventful few months for Nvidia and the market overall amid President Donald Trump ‘s tariff war and concerns about an economic downturn. Nvidia stock got crushed during Wall Street’s sell-off from late February to early April. Since then, it has soared more than 40% since its 2025 closing low of $94.31 per share on April 4. “I would not be a buyer” of Nvidia at these levels, Jim Cramer said Tuesday, as shares continued to rebound and climbed around 3% in the session. While Tuesday’s intraday advance puts the stock slightly positive year to date, it remains about 10% below its all-time high on Jan. 6, a few weeks before Chinese AI startup DeepSeek jolted the broader AI trade. NVDA 5Y mountain Nvidia 5 years Nvidia’s earnings have become a hyped-up Wall Street event ever since that May 2023 report , when its second-quarter revenue guidance of $11 billion came in 54% above analysts’ expectations, a jaw-dropping beat that sent a stock that had already doubled year to date up 24% the following day. It was a defining moment in the early days of the generative AI boom, sparked six months prior with the release of OpenAI’s ChatGPT. The moment carved into stone what investors had been writing down in pencil: All this investment into AI computing power was going to create a windfall for Nvidia, whose cutting-edge graphics processing units, or GPUs, were used to train ChatGPT. And, indeed, it has. Even buying Nvidia stock the session after its post-earnings surge and just holding would be worth a nearly 250% gain on paper. Analysts are expecting Nvidia on Wednesday to report revenue of $43.2 billion for the three months ended in April, representing 66% growth from a year ago and a truly staggering 500% increase from two years ago. But considerable crosscurrents are surrounding Nvidia’s upcoming report — just as there were in late February when the DeepSeek saga was top of mind — that could muddy both its first quarter results and ongoing second quarter guidance — and, potentially beyond that. As the AI boom matures, the investment narratives have become more nuanced. In the here and now, it is all about whether Nvidia’s February-to-April quarter — and, just as importantly, its current quarter outlook — will be able to exceed expectations, considering the Trump administration blocked sales of its previous GPU for the Chinese market, known as the H20. While media reports suggest Nvidia is preparing another workaround for China that complies with U.S. government export controls, it isn’t currently available and contributing to revenue in the May-to-July period. Wall Street has recalibrated its expectations for Nvidia’s current quarter guidance in the wake of the H20 restrictions. The current consensus for the July quarter is for $45.9 billion in revenue, according to FactSet, down $1.8 billion since April 15, the day before the ban was announced. However, some analysts, including those at Morgan Stanley, believe the consensus expectation has not come down enough. That could mean Nvidia’s guidance ends up falling short of estimates. Trump’s shifting tariff policy — and the uncertainty that it injects into the broader economy and companies’ willingness decisions — is an unknown variable that also could impact Nvidia’s results and short-term outlook. That is a risk despite many of its largest customers, including so-called hyperscalers Microsoft , Meta Platforms , and Amazon , signaling alongside their latest earnings reports their intentions to keep spending aggressively on AI. All three are also Club names. “We think that April quarter is poised for a miss in revenues largely from macro uncertainty and from the H20 ban,” analysts at Piper Sandler wrote to clients Tuesday. H20 ban resulted in Nvidia announcing a $5.5 billion inventory write-down. In addition to sales, investors will be paying close attention to what all these dynamics mean for Nvidia’s expectations for gross margins, an increasingly important metric for the Street. The expectation has been that as Nvidia’s rollout of its Blackwell generation AI chips progresses, the company will be able to get gross margins back up in the mid-70% range later this fiscal year. But a lot has changed since Nvidia most recently reported results in late February, and it’s fair to wonder whether this projection will remain in place. Nvidia’s spate of chip deals in the Middle East — part of the company’s yearslong “sovereign AI” push — figures to be another topic of conversation Wednesday night. It will largely center around when commitments from the likes of Saudi Arabia’s Humain will start to materialize into sales, and how financially lucrative these planned data center projects in the region will be in the coming years. As Jim has said, oil-rich nations investing aggressively in AI have the potential to act as “another hyperscaler.” Last week, Nvidia also publicized a new supercomputer being built in Taiwan by one of the island’s national research laboratories. “These large contracts, in addition to existing deals with hyperscalers, should provide investors with longer-term visibility to revenues that stretch into [next calendar year],” Piper analysts wrote. “We advise investors to weather the uncertainty and stay long the stock as this is likely largely the last wave of negative news for NVDA this year,” analysts also said in the note. As far as the Club is concerned, it is difficult to know whether Nvidia is entering a calmer period of positive headlines far outweighing the negative ones. The way the stock has traded in recent weeks certainly suggests that investors are dreaming that such a scenario will be the case. Still, Jim remains wary about acting on the stock ahead of the earnings, even if he is confident that Nvidia’s leadership in AI computing is as apparent as it was two years ago. (Jim Cramer’s Charitable Trust is long NVDA, AMZN, MSFT and META. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Jensen Huang, co-founder and CEO of Nvidia Corp., speaks during a news conference in Taipei on May 21, 2025. Cheng / AFP) (Photo by I-HWA CHENG/AFP via Getty Images)
I-hwa Cheng | Afp | Getty Images
Two years ago this month, Nvidia shocked investors with sales guidance beyond anybody’s wildest dreams, accelerating the stock’s epic run. The seemingly unstoppable Club name hit turbulence earlier this year before clawing its way back into the green. The next test of its recovery rally comes Wednesday evening.
4 weeks agoLast Updated: May 27, 2025
0 1 5 minutes read
