Nvidia’s (NVDA) latest earnings were another reminder that the company’s core business is on fire, even if the headlines about China are worrying. Revenue for the July quarter jumped 56 percent to $46.7 billion, beating Wall Street expectations. Guidance for the current quarter also came in ahead of forecasts at around $54 billion. This strength was enough to overshadow a lack of sales to China, where political fights have stalled demand for its H20 chips.
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NVDA stock slipped right after the report, but that looked more like profit-taking after a big run than a loss of confidence. Nvidia has climbed about 35 percent in the past three months. Traders believe that Nvidia’s growth trajectory is still intact.
The China Problem Is All Upside from Here
For now, China remains the company’s weakest link. Nvidia confirmed there were zero sales of its H20 chip to Chinese customers last quarter. It also has not assumed any new shipments in its October guidance. U.S. export rules and tensions with Beijing have left the business stuck.
But management is keeping the door open. CEO Jensen Huang said discussions with Chinese officials continue and that sales of a newer Blackwell chip remain a “real possibility.” CFO Colette Kress added that Nvidia is “working through geopolitical issues.” None of this is in the numbers yet, which means any breakthrough could hand Nvidia a multi-billion-dollar boost.
Back in May, Nvidia estimated that without restrictions, it could have sold $8 billion worth of H20 chips in a single quarter. Even if only part of that comes back, it would be a meaningful upside. For investors, the important point is that China is not priced in.
Here’s the Real Reason Supporting Nvidia’s Bullish Narrative
The real reason to stay bullish on Nvidia is the launch of its new AI rack servers, the GB200 NVL72 and GB300 NVL72. Each rack links 72 GPUs together, up from just eight in the prior version. That is a massive leap in computing density, and it is arriving right as AI models require exponentially more power.
Huang said on the call that production is now in full swing after some early supply challenges. Each rack sells for several million dollars. He called the launch “revolutionary” and said it delivers a generational leap in performance. Early signs confirm the ramp. Nvidia’s networking revenue surged 46 percent last quarter because the racks require far more networking hardware.
This is where the growth will come from. Big Tech companies are lifting capital spending budgets to chase AI demand, and startups are desperate for more capacity. Nvidia has the product they need.
NVDA Stock Still Looks Reasonable
Even after doubling from its April lows, Nvidia stock does not look stretched. Shares trade at about 32 times forward earnings. That is not expensive considering Wall Street expects earnings to grow more than 50 percent this year.
At a market value of $4.4 trillion, Nvidia is already the biggest company in the world. But the ramp in rack servers suggests several more strong quarters lie ahead. Investors who have held through the volatility have been rewarded, and the long-term story has not changed.
Is Nvidia a Buy, Hold, or Sell?
Analysts remain firmly bullish on Nvidia despite the noise around China. Out of 38 analysts tracked over the past three months, 34 rate the stock a Buy, three say Hold, and just one recommends Sell. The average 12-month NVDA price target sits at $211.97, which implies nearly 18% upside.
