Nvidia Corp (NASDAQ:NVDA, XETRA:NVD) is set to report second-quarter earnings after the market closes on August 26 and Bank of America thinks the chipmaker is about to do what it usually does: beat expectations and raise its outlook, only this time with an extra catalyst behind it.
In a note maintaining its Buy rating and $350 price objective on the stock, BofA analysts said they expect Nvidia to post revenue of $94 billion to $95 billion, a $3 billion to $4 billion beat above the company's own $91 billion guidance.
More notable, though, is what they expect for guidance going forward: a raise to $107 billion to $108 billion, well above the roughly $104 billion that Wall Street analysts are currently modeling.
The reason for that optimism comes down to timing. Nvidia's next-generation Vera Rubin platform is starting to ship, along with new Vera CPU ramps, and BofA points to strong cloud capital spending trends as further support. The analysts also flagged that spot prices for renting GPU capacity have hit all-time highs, which they say could ease lingering concerns about return on investment and speed up how quickly customers move to the new generation of chips.
Rising memory prices are a worry across chipmakers this year, but BofA doesn't see it hitting Nvidia hard. The firm expects gross margin to settle around 73% to 74% long-term, down only modestly from about 75% today.
On upcoming Vera Rubin racks, the margin hit from memory is just 60 basis points versus the current Blackwell Ultra generation. New "pod-level" systems could see a steeper 500-basis-point hit, but BofA expects those to stay a small part of the mix. Long-term supply deals, including Nvidia's ties to SK Hynix, should also help cushion the pressure.
Critics argue Nvidia's direct stakes in customers like OpenAI ($30 billion) and Anthropic ($10 billion) artificially inflate demand. BofA counters that the roughly $70 billion invested so far is just 15% of the $470 billion in free cash flow it expects Nvidia to generate in 2026 and 2027, leaving room to keep returning 50% of free cash flow to shareholders. A separate $250 billion OpenAI/SB Energy backstop isn't upfront money either, BofA notes, but a contingent guarantee that only triggers on default, with payments back-end loaded to 2028 or later.
Five things to watch beyond the headline numbers
BofA laid out what it considers the real debates investors should be paying attention to this quarter, beyond just whether Nvidia beats and raises:
- The Vera Rubin rollout - any updates on supply and whether Nvidia's forecast of more than $1 trillion in revenue from calendar years 2025 through 2027 changes.
- OpenAI's financing arrangement - specifically, more clarity on the vendor financing and backstop deal, and when Nvidia might be able to redirect that cash toward stock buybacks instead.
- Whether margins hold up as memory costs keep rising. Memory now makes up 40% to 50% of the cost to build Nvidia's systems, compared with 15% to 20% or so historically.
- How hyperscalers are growing compared to what BofA calls ACIE (its term for AI cloud infrastructure providers outside the traditional hyperscalers).
- The open-versus-closed AI model debate and what it means for the size of Nvidia's addressable market.
