Nvidia

I remain positive on shares of NVDA and believe over the next two years growth will be higher for longer. That said, the cross currents around next week’s earnings set up a Catch-22 for the AI complex, because stronger guidance can amplify worries about overspending, while a modest raise can be read as the first sign that growth is normalizing faster than expected. As for changes to Street estimates, Jensen’s comments on October 28 suggest the consensus CY26 growth estimates will increase from the current 39% y/y growth to 45%.

Over the past two months, Nvidia has made five major investments totaling $15B in near-term commitments and $100B in long-term commitments. During that same period, the company has also invested in approximately seven private companies and established twelve new partnerships. In total, Nvidia has made about twenty-five strategic announcements. The common thread that ties them together: Jensen Huang’s belief that the future of work is shifting from tools to bots.

Here are the five pressure points for this Wednesday and Thursday’s earnings from Google, Meta, Microsoft, Amazon, and Apple (and an Nvidia bonus). Big picture: The setup carries more risk than it did three months ago, as investor confidence is notably higher heading into this round of reports. That said, the key takeaway will likely remain that we are still in the early stages of AI adoption, and the largest technology companies continue to hold their ground.

Shares of Nvidia are down 6% since reporting July earnings compared to the Nasdaq flat. The sell-off reflects disappointment around the October revenue guide versus the whisper number and growing concerns about customer concentration. Looking forward, growth in CY26 will once again depend on hyperscaler capex trends, excluding Meta because the growth expectation is already sky high for next year. If Microsoft, Google, and Amazon maintain their 7% capex growth outlook, Nvidia should meet consensus growth estimates for CY26 of 31%. If those companies increase capex by 25%, Nvidia’s growth could reach 36%.

Shares of NVDA are down 3% in after-hours on a fractional miss in July datacenter revenue and a October revenue outlook that fell below the whisper. Adjusting for the $2B–$5B in China H20 revenue excluded from the October guide, the outlook lands about 2%-7% above the October revenue whisper. Additionally, Jensen dropped a nugget on the call hinting that growth in CY26 could be closer to 50%, well above the Street's 29% expectation. The bottom line is we're still early in the AI buildout, and growth next year will be higher than most expect.

The Grinch's rant about hating "the noise, noise, noise" will resonate with Nvidia investors next week. This quarter will have a lot of noise, much of it around how much of the China H20 catchup will be softened by Lutnick insulting China leadership, when a separate China chip based on Blackwell be available, and how the U.S. 15% China revenue share will impact margins. Cutting through the noise, the likely takeaway will be that Street growth rates for calendar 2026 are too low. The Street is currently expecting 27% top line growth next year compared to 55% this year. I expect the Street will revise the CY26 outlook to up 30-35%.

I believe Nvidia can maintain gross profit dollars on its China business (13-15% of revenue) despite the revenue-sharing arrangement with the US government, because they should be able to raise prices by about 18% without hurting demand. This likely settles the China discussion until Nvidia releases a scaled-down Blackwell chip for the Chinese market, an area where Trump has left the door open for changes to revenue share percentages. The biggest remaining question is what this means for Tesla and Apple.

Shares of NVDA are up 4% on the news that it will resume sales of the H20 in China, but this move understates the true impact. I believe this development will add 10% to the Street’s revenue estimates over the next four quarters. For CY26, analysts were previously expecting 25% growth. Following the announcement, consensus for those analyst that have updated their models now calls for 30% growth. I believe CY26 will ultimately see growth of 35% or more. The bigger takeaway: China's demand for the H20 highlights that the AI investment cycle is still in its early innings, with a long runway ahead.

Talk of China curbs having a negative 15% impact on revenue dominated Nvidia's earnings conversation, obscuring the most important takeaway: the company's business is booming, and we are still early in the AI infrastructure buildout. Adjusting for the impact of China, the company would have raised July revenue estimates by 13% versus the Street, compared to an average guide-up of 2% over the previous three quarters. Growth excluding China should be closer to 76% in July, compared to expectations before the April curbs, which called for 60% growth. As for the timing of a resolution in China, reading between the lines, Jensen is suggesting this will get sorted out later this year, and the China opportunity should reemerge.

We expect investors to come away from Nvidia's April results and June guidance with three key takeaways: 1) The revenue impact from U.S. chip restrictions on China will reduce revenue by approximately $15 billion over the next three quarters. 2) This sets up easier y/y comparisons in China for CY26. 3) The ongoing AI buildout remains in its early stages and should partially offset the effects of the export curbs. As a result, revenue growth in CY26 is likely to exceed the current Street expectation of 24%.

We evaluated AI’s staying power based on March earnings from key tech providers. Growth rates are not slowing as quickly as many investors had feared, suggesting that AI’s momentum remains intact. Concerns about the pace of improvement in AI models may actually strengthen the case for increased investment. Fundamentals and the outlook for AI growth and investment are either stable or improving compared to three months ago — despite ongoing uncertainty around tariffs, macroeconomic conditions, and the speed of model innovation.

​Don't let the recent downturn in the AI trade mislead you. The reality is that AI-powered service providers are struggling to keep up with demand, and AI infrastructure providers are unable to build capacity fast enough. All the potential that drove AI stocks higher in 2024 remains intact. At Deepwater, we continue to believe there are still 2–3 years left in this bull market.​