By Arsheeya Bajwa and Aditya Soni
Feb 24 (Reuters) – As Nvidia heads into quarterly earnings on Wednesday, AI investors are seeking evidence that the chipmaker’s profits are growing apace on the back of a $630 billion capital spending budget from Big Tech. But signs of risk to Nvidia’s long-held dominance are also emerging from hyperscalers’ plans to design their own cheaper AI chips.
After powering much of the U.S. stock market rally for the past three years, Nvidia’s stock has risen just about 2% so far in 2026.
Along with Advanced Micro Devices, which is set to unveil a new flagship AI server later this year, Alphabet’s Google has emerged as a top rival with a deal to provide Claude chatbot creator Anthropic with its in-house chips called TPUs. Google is also in talks to supply Meta – a large Nvidia customer, according to media reports.
To defend its position, Nvidia struck a deal, reportedly worth $20 billion, last year to license chip technology from Groq – a move that analysts say would boost its position in the booming market for inference, the process by which a trained AI model answer questions in real time. Nvidia last week also agreed to sell millions of chips to Meta, though it did not disclose the value of the deal.
But Nvidia, the biggest winner of the AI boom, has itself stoked doubts about whether the spending is sustainable by drawing out the process of a potential $100 billion investment in OpenAI, one of its biggest customers. A recent media report said it plans to replace that commitment with a smaller $30 billion investment.
“This earnings in particular is important because people are so concerned about AI spending – whether we’re in a bubble,” said Ivana Delevska, chief investment officer of Spear Invest, which holds the company’s shares in an exchange-traded fund. “Showing that earnings are not really decelerating will be pretty important.”
Wall Street expects Nvidia to report that profit in the quarter ended January surged more than 62%, according to data compiled by LSEG, a slowdown from 65.3% growth in the previous quarter as it faces tougher comparisons with its previous earnings.
Revenue likely jumped more than 68% to $66.16 billion. Analysts expect Nvidia to forecast that first quarter revenue will grow another 64.4% to $72.46 billion. The company has surpassed sales expectations for the past 13 quarters, though that delta has shrunk.
RBC analysts expect the company to forecast April quarter revenue at least 3% above estimates. Spear Invest’s Delevska, an Nvidia bull, sees the company forecasting sales as much as $10 billion above estimates, expecting it to surpass market estimates by more than 13%.
STILL NO. 1
Analysts are still expecting demand for Nvidia’s pricey chips, which act as the “brains” of servers processing huge AI workloads to remain robust, and garner most of Big Tech’s massive spending to expand AI data center capacity this year.
Nvidia’s executives also hinted in January that they were discussing data center orders for next year with customers, leading several analysts to forecast the company would update a $500 billion order backlog figure it first offered in October.
The biggest constraint on Nvidia’s growth, though, could be supply chain bottlenecks that limit the speed of AI chip shipments as Nvidia and rivals are vying for space on contract chipmaker TSMC’s 3-nanometer assembly lines.
“We think Nvidia will meet expectations, but it is hard to see them delivering much upside in light of TSMC capacity,” Jay Goldberg of Seaport Research Partners wrote in a note.
But the potential return of Nvidia’s AI chip sales to China – earlier restricted due to export curbs placed by the U.S. government – could help bump up sales.
CEO Jensen Huang said last month he hopes China will allow the company to sell its powerful H200 AI chip in the country and that the license is being finalised.
Rival AMD added sales of AI chips back to its forecast for the current quarter after it received licenses to ship some of its modified processors to China.
Nvidia is expected to record adjusted gross margin of 75% in the fourth quarter, an increase of more than one percentage point from the year-ago period.
Analysts don’t expect the company to hurt from the global memory supply shortage. Nvidia’s pricing power and the likelihood of it already having locked in high-bandwidth memory allocations for the year would cushion it from the impact of rising memory prices, they said.
(Reporting by Arsheeya Bajwa and Aditya Soni in Bengaluru; Editing by Sayantani Ghosh)
