NVIDIA (NVDA 6.53%) is a $2.6 trillion company and currently represents 5.8% of the value of the S&P500 Index. In June, Nvidia stock posted a 150% annual gain, accounting for a third of the S&P 500’s total return.

Both Nvidia and the index have been in a rut since mid-July, but a massive event is coming on August 28 that could turn both around. That’s when Nvidia releases its financial results for the second quarter of fiscal 2025 (which ended July 31), and if past quarters are any indication, it could be an absolute smash hit.

Nvidia develops the most powerful data center chips to handle artificial intelligence (AI) workloads, and demand from some of the world’s biggest tech giants continues to outstrip supply. As a result, investors are eagerly awaiting the company’s latest earnings results. Here’s my prediction for how Nvidia stock will react after it’s released.

Image source: Nvidia.

Nvidia dominates the AI ​​data center chip market

Nvidia’s data center graphics processing units (GPUs) set the standard for AI development. GPUs are designed for parallel processing, meaning they can perform multiple tasks at once. They can handle high throughput and typically have a significant amount of onboard memory, making them ideal for processing large amounts of data. That’s key when it comes to training AI models and performing AI inference.

AI applications could spark a productivity boom across the global economy worth trillions of dollars over the coming decade, according to many Wall Street forecasts. As a result, data center operators are replacing much of their traditional CPU-based infrastructure with GPUs to meet demand from AI developers. Nvidia’s flagship H100 GPU has been the go-to choice since last year, but the company is trying to beat its own benchmarks in terms of performance.

Nvidia’s new H200 can perform AI inference at nearly twice the speed of the H100 while using half the power. Then there’s the GB200, which is based on Nvidia’s new Blackwell architecture and can perform AI inference at a whopping 5x the speed of the H100. Blackwell-based chips will begin shipping to customers in large quantities in 2025.

Nvidia has a firm grip on the data center GPU market. In 2023, the company had an estimated market share of 98%, and although that will shrink this year as serious competition emerges from other chipmakers such as Advanced micro devicesDemand is likely to continue to exceed supply.

This is what Wall Street expects from Nvidia’s upcoming quarterly report

Nvidia generated record revenue of $26 billion in the first quarter of fiscal 2025 (ended April 28), up 262% from the same period last year, far exceeding Wall Street’s forecast of $24.6 billion. The result included $22.6 billion in data center revenue alone, representing 427% growth due to rising GPU demand.

Nvidia also delivered an incredible bottom line result: earnings per share of $6.12. That was an increase of 461% and significantly above Wall Street’s forecast of $5.59.

Nvidia’s forecast was also underestimated by Wall Street. The company told investors in its August 28 earnings call that it expected second-quarter revenue of $28 billion. However, Wall Street had estimated revenue at $26.6 billion.

Analysts have since caught up and revised their consensus estimate upwards to $28.5 billion, suggesting that Nvidia’s own forecast may even be too conservative. We’ll know for sure in two weeks.

Nvidia shares could soar thanks to second-quarter results

While a stock’s performance on any given day is usually just noise, here’s how Nvidia reacted to its last two earnings reports:

• Nvidia reported its fourth-quarter fiscal 2024 results after the market closed on Feb. 21, and its shares rose 16.4% the following day.
• Nvidia reported its first-quarter fiscal 2025 results after the market closed on May 22, and the stock closed 9.3% higher the following day.

But the long-term trend is crystal clear. In early 2023, just before AI fever hit Wall Street, Nvidia was a $360 billion company, and its shares have risen more than 700% since then. In other words, a series of incredible earnings reports has created sustained upward momentum in the stock price, and I think the second quarter will add to that trend.

If Nvidia beats Wall Street’s revenue forecast, the stock price could rise by at least 9% the next day, as it did after its first-quarter results. Given the recent drop in share price, the reaction could be even more positive. However, investors should focus on the longer-term perspective.

If Nvidia succeeds in generating earnings per share of $3.75 in fiscal 2026 (which begins in February 2025), as Wall Street expects, the company’s stock would have to rise 108% over the next 18 months just to maintain its current price-to-earnings (P/E) ratio of 58.2.

Admittedly, this P/E ratio is quite expensive compared to the Nasdaq-100which trades at a P/E ratio of 29.6, but this could be temporarily justified given Nvidia’s rapid growth.

I say “temporary” because this dream run will eventually come to an end. Competition in the AI ​​data center chip market is growing, and like any technology, advancing AI beyond a certain point will bring diminishing returns, shrinking demand. It’s difficult to predict exactly when that will happen, but investors should be wary of blindly holding the stock in the hope of earning the same returns Nvidia has in the past.