Nvidia's Q2 earnings to test resurgent AI trade

Wall Street awaits Nvidia's second quarter earnings, a critical moment since the AI trade exploded. While Big Tech reported results a month ago, Nvidia finally revealed its latest quarter. Chip stocks rallied on Tuesday, and Nvidia's stock ended a 7-day losing streak, up about 2.19%. This marks its longest losing streak since 2022.

The earnings report arrives as chip stocks struggle to maintain gains following July's steep declines due to concerns over companies' AI investments. Microsoft, Amazon, and Google helped ease some fears with strong growth in their cloud businesses, though Google and Meta raised concerns about increased spending. Nvidia is expected to report adjusted earnings per share of $2.09 on $92 billion in revenue, a 96% year-over-year revenue jump and continued quarter-over-quarter acceleration.

Nvidia broke down Data Center revenue last quarter, separating it into Hyperscalers, AI Clouds, Industrial, and Enterprise sections. Data Center revenue is projected to surpass $85.4 billion, a 107% increase, with Hyperscaler revenue at $43.5 billion and ACIE sales at $41.7 billion. Nvidia's revenue primarily comes from hyperscalers like Amazon, Google, and Microsoft, but each company either builds chips to reduce dependence on Nvidia or sells them to third-party customers, potentially harming Nvidia in the future.

The AI leader is now partnering with financial giants BlackRock, Blackstone, KKR, Apollo, Brookfield, and Goldman Sachs to create a $500 billion capital pool that would securitize Nvidia's GPUs. The company is also funding SB Energy and OpenAI's efforts to build an 8-gigawatt data center in Ohio, with up to $150 billion in investment.