Nvidia faces growth test as Rubin debut meets AI financing scrutiny

Nvidia's upcoming results on Wednesday will determine if the company's new Rubin chips can continue driving substantial growth, as some investors question the long-term viability of the AI spending surge. The chipmaker, a major beneficiary of the AI infrastructure race, has seen its stock surge 11.8% this year, but faces pressure due to billions of dollars pumped back into the AI ecosystem, raising concerns about circular deals that could inflate demand artificially and distort economic indicators.

Nvidia's shares briefly surpassed Apple's valuation last month, but analysts predict it will lag major rivals.

Analysts expect the company's second-quarter revenue to nearly double to $92.18 billion, driven by a more than two-fold increase in data center sales. The rapid growth is fueled by big tech's spending spree on data centers, as well as rising expenditures by smaller AI-focused cloud firms like CoreWeave, which are backed by Nvidia. However, investors are closely watching how quickly Nvidia can shift customers from its Blackwell chips to the upcoming Vera Rubin processors, with shipments anticipated to commence this autumn.

The rapid growth is driven by increased spending by large tech companies on data centers, as well as by smaller AI-focused cloud companies such as CoreWeave, which are backed by Nvidia. The use of Nvidia's balance sheet to support the boom has drawn scrutiny, as the company has arranged $500 billion in financing from six major U.S. financial institutions for its customers building AI infrastructure, and guaranteed up to $105 billion to help OpenAI lease a massive data center in Ohio for 20 years.

This has raised concerns about potential circular financing, as OpenAI would ultimately pay for the lease and Nvidia is assisting in financing and securing data centers, power supplies, and facilities.