Artificial intelligence (AI) has been the dominant force behind the market’s rally for nearly two years, and Nvidia (NVDA) remains at the center of it. With earnings due on May 20, investors are not really debating whether the leader in accelerated computing will deliver another strong quarter. The bigger question is whether the AI spending cycle driving Nvidia’s explosive growth still has room to expand from here. I believe it does, which is why I remain bullish on NVDA ahead of the report.
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Trade AMZN with leverageThe stock has rallied 28% since bottoming in late March 2026. Despite Nvidia’s massive rally, the valuation still looks far more reasonable than many investors assume. The stock currently trades at roughly 28x forward earnings, below both the semiconductor industry median and well under Nvidia’s own historical average multiple. For a company expected to grow revenue nearly 78% year-over-year this quarter, I continue to view the longer-term risk-reward profile as attractive.
Blackwell Ultra Is the Main Event
Much of the attention this quarter will center on Nvidia’s Blackwell Ultra platform, the company’s latest and most powerful AI chip architecture, offering higher performance for running and training large AI models.
Nvidia’s Blackwell platform has entered a phase of aggressive high-volume shipping, serving as the primary catalyst for the company’s accelerating data center growth. Production capacity and shipments are expected to step up significantly quarter-over-quarter as supply constraints ease. Furthermore, Blackwell continues to demonstrate exceptional pricing power; average selling prices (ASPs) have risen to an estimated $40,000 per unit, substantially higher than those of legacy architectures.
Data center revenue accounts for more than 90% of Nvidia’s total sales and is expected to come in at $73 billion for the quarter. Investors will be listening for updates on production ramp progress and whether pricing power is holding as competition from Advanced Micro Devices (AMD) and custom AI chips from Amazon (AMZN), Alphabet (GOOGL), and Meta Platforms (META) continues to build. None currently matches Nvidia’s scale or ecosystem, but the competitive pressure is building.
China Remains a Significant Overhang
U.S. export restrictions have effectively closed Nvidia out of the Chinese AI accelerator market, which the company estimates will grow to nearly $50 billion. Nvidia has already stated it is not assuming any data center compute revenue from China in its guidance for this quarter.
CEO Jensen Huang has been direct about the stakes. Losing access to the Chinese market, he has said, would have a material adverse impact on the business. Investors will be listening for any updates on Nvidia’s options within current regulations, including whether lower-powered, export-compliant chips could recover some of that ground.
Gross Margins Are Just as Important as Revenue
Nvidia’s gross margin measures how much of each dollar of revenue the company retains after production costs. After experiencing a temporary dip into the low-70s during the early phases of the Blackwell supply ramp, margins have stabilized, tracking at 75.2% last quarter. Management’s current guidance targets a steady mid-70% range for the quarter and the remainder of the year as manufacturing yields steadily improve.
Any sign that margins are slipping below guidance could trigger concern about the economics of AI chip production. Margin stability alongside strong revenue would reinforce the bull case significantly.
Valuation Remains Compelling Relative to Growth
The valuation case for Nvidia is more nuanced than headline P/E numbers suggest. On a trailing basis, NVDA trades at around 47x earnings, above the semiconductor sector average of roughly 34x. At first glance, that sounds expensive.
However, the forward picture looks very different. At approximately 28x forward earnings, Nvidia trades below the semiconductor industry median and well below its own five-year historical average of around 64x. The stock’s PEG ratio, which adjusts the price-to-earnings multiple for expected growth, stands at roughly 0.68. A PEG below 1 generally indicates the market is not fully pricing in the company’s earnings growth trajectory.
Given that consensus estimates project near-term quarterly earnings per share (EPS) to more than double year-over-year at $1.74, the stock’s valuation remains highly defensible for a company scaling at this velocity. Analysts are projecting $78.62 billion in revenue for the quarter, representing 78% growth year-over-year.
What Wall Street Expects
The consensus view is a Strong Buy, backed by 40 Buy ratings and an average price target of $280.31. Goldman Sachs (GS) analyst James Schneider, who carries a Buy rating and a $250 price target, described the stock as trading at a discount to its own historical valuation ahead of its May 2026 earnings report. His estimates for 2026 and 2027 sit 14% and 34% above Wall Street consensus, reflecting confidence that hyperscaler AI spending will remain stronger for longer than the market currently assumes.
My Take
Nvidia heads into the May 20 earnings report with strong momentum, a favorable valuation relative to its own history, and an AI infrastructure market that shows no sign of pausing. The forward P/E of roughly 28x is below sector peers and below Nvidia’s own historical average, leaving room for multiple expansion if the company delivers another beat-and-raise quarter.
The risks are real. China export controls, gross margin pressure from Blackwell scaling, and growing competition from custom silicon all deserve attention. However, for long-term investors, the combination of a dominant market position, accelerating earnings growth, and a valuation below historical norms makes NVDA one of the more compelling opportunities in the semiconductor space heading into this report.