Next Week's Nvidia Earnings Will Highlight the Risks Associated With the Company's Stock

Nvidia Corp. shares were down 1.6% during midday trading on Friday, suggesting the stock may break its streak of four consecutive weekly gains. Investors appear to be growing cautious ahead of the company’s upcoming earnings report for its fiscal first quarter, scheduled for next week. Some analysts are warning that ongoing trade challenges, particularly those involving China, could potentially impact Nvidia’s forward guidance.

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Last week, Nvidia stock posted a significant gain of 16%, but as of Friday, it was on pace to end this week down by 1.9%. The recent pullback is being seen as a healthy breather after a strong rally in semiconductor stocks, which had been lifted over the past five weeks by easing trade tensions between the U.S. and China. The two nations agreed to a temporary 90-day pause on implementing new reciprocal tariffs, which had provided a tailwind for chipmakers.

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Jordan Klein, an analyst at Mizuho Securities, shared his thoughts in a note released before Friday's market open. He acknowledged the recent strong performance of chip stocks but suggested that a period of profit-taking was likely. “Not saying everyone dumps Semis today,” Klein wrote, “but many of the stocks rallied so much that the near-term risk-reward no longer looked favorable in my eyes into mid-year.”

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Meanwhile, Bank of America continues to rate Nvidia as a "buy," reaffirming its positive outlook in a note issued Friday. However, analysts cautioned that Nvidia’s guidance for the July quarter could be complicated by the impact of U.S. government restrictions on its Chinese operations. In April, the Biden administration extended a ban—initiated by former President Donald Trump—that prohibits Nvidia from selling its H20 chips, which were specifically designed for the Chinese market.

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Nvidia acknowledged in an April regulatory filing that it anticipated financial charges of up to $5.5 billion for the quarter due to the new export restrictions. These losses stem primarily from the inability to deliver chips previously intended for Chinese customers.

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Nvidia’s CEO, Jensen Huang, recently discussed the issue in an interview with Stratechery. He described the ban as “deeply painful,” revealing that Nvidia essentially had to walk away from $15 billion in potential sales and roughly $3 billion in associated tax revenue.

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Despite the challenges, analysts like Vivek Arya from Bank of America remain optimistic about Nvidia’s long-term outlook. Arya said that while investors will be closely watching the upcoming results for any signs of pressure on gross margins, they’re especially focused on whether the company can restore profitability to the mid-70% range later in the year.

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Such a recovery would likely reflect the ramp-up of Nvidia’s next-generation Blackwell platform, which is expected to enhance performance and efficiency across its AI-focused products.

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Arya also reiterated his view that Nvidia remains a top pick within the technology sector. He believes the company is uniquely positioned to benefit from the ongoing global build-out of artificial intelligence infrastructure. Furthermore, he sees potential for a rebound in Nvidia’s Chinese sales if the company succeeds in introducing redesigned, export-compliant chips later in the year.

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For the April quarter, Bank of America expects Nvidia to report results slightly above consensus estimates, though the $5.5 billion write-down tied to the H20 chip ban is projected to push gross margins down to around 58%. That’s well below the 71% margin Nvidia had forecast earlier—before the latest restrictions took effect.

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Looking ahead to the July quarter, analysts surveyed by FactSet expect Nvidia to report approximately $46 billion in revenue. Bank of America, however, revised its own forecast slightly downward, trimming its estimate from $48 billion to $46.4 billion to reflect the ban’s anticipated impact. The previous projection was made before the latest U.S.-China trade restrictions were implemented.

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Despite the short-term headwinds, Nvidia is still viewed by many analysts as a cornerstone in the semiconductor and AI sectors. Its ability to adapt to geopolitical shifts, develop compliant products, and drive innovation keeps it well-positioned for future growth—even as current conditions introduce some uncertainty.

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