Nvidia under pressure: quarterly results must prove AI demand is holding

Nvidia is preparing to publish its results for the second quarter of fiscal year 2027. The chip giant remains at the absolute center of the AI revolution, but the market is watching the stock with an increasingly critical eye. Analysts expect revenue of $92.17 billion — nearly double the figure from a year earlier — and earnings per share of $2.10.

While the growth figures remain impressive, the spectacular stock rally of recent years has stalled somewhat. With a share price gain of around 14 percent this year, Nvidia is only narrowly outperforming the Nasdaq. Investors are wondering how long the current pace can be sustained, especially now that competitors such as AMD and Google are knocking at the door.

New product generation and rising memory prices

Nvidia finds itself in the middle of an important transition phase. Shipments of the new Vera Rubin architecture, the successor to the Blackwell generation, have begun to key customers such as Microsoft and OpenAI. CEO Jensen Huang previously reiterated the ambition to generate around $1 trillion in revenue from these combined chip generations through 2027.

At the same time, the sector is facing significant headwinds. Global shortages of both high-end HBM memory and standard DRAM are driving component prices up sharply. To secure supply for the Vera Rubin rollout, Nvidia already spent $145 billion in the first quarter to lock in components. Despite this cost pressure, analysts are counting on a gross margin of around 75 percent.

Customer diversification and space plans with Musk

Besides the well-known tech giants, Wall Street is watching closely how spread out Nvidia's customer base is. The company is trying to become less dependent on the traditional top five "hyperscalers" by leaning heavily into enterprise customers, industrial players, and smaller AI cloud providers.

Also notable is the increasingly close relationship with Elon Musk. Nvidia now holds a $21 billion stake in SpaceX. Musk announced that SpaceX will equip its data centers exclusively with Nvidia chips. In addition, the companies are working on a remarkable project: "SpaceX Starmind AI," a space-optimized Vera Rubin NVL72 system set to be launched into orbit late next year.

Concerns over enormous capital spending

The biggest long-term challenge lies in the financial capacity of Nvidia's customers. Major players such as Amazon, Alphabet, Tesla, and SpaceX posted negative free cash flow in the past quarter as a result of towering AI investments.

To keep data center construction going, Nvidia is setting up creative financial arrangements, including guarantees and credit programs with financial partners worth up to $500 billion. While this props up sales of expensive chips in the short term, analysts at Morgan Stanley warn that the long-term risks of these financial strategies remain hard to assess for now.