Nvidia Corp (NASDAQ: NVDA) reports second-quarter earnings Wednesday after the bell. Wall Street projects revenue of $92.03 billion, a significant increase from $46.14 billion in the same period last year.

Hyperscaler Demand Accelerates

Dan Niles, founder of Niles Investment Management, argues that market expectations for slowing growth may be too conservative. He highlighted that hyperscaler capital expenditure grew 92% year-over-year and 29% quarter-over-quarter in the three months ended June 30. This represents the fastest pace since the launch of ChatGPT in late 2022.

Public cloud revenue growth at the three largest cloud vendors also accelerated to its fastest pace ever, rising 43% year-over-year and 15% quarter-over-quarter. Their aggregate operating margins expanded by 2 percentage points to a record 39%.

Goldman Sachs analyst James Schneider echoed this view, expecting "a solid quarter with meaningful upside to guidance supported by tight GPU supply/demand trends."

AI Infrastructure Boom Test

Daniel Newman, CEO of The Futurum Group, told Benzinga that Nvidia is the "cleanest test" of whether AI infrastructure demand has actually peaked. Newman expects revenue could reach $94 billion to $95 billion, potentially exceeding Nvidia’s guidance of $91 billion plus or minus 2%. He projects October-quarter revenue potentially climbing toward $107 billion to $108 billion and eventually topping $110 billion.

Newman believes the next phase could become more durable if ACIE growth accelerates rapidly, signaling that enterprises, industrial companies, sovereign customers and neoclouds are taking on more AI compute demand. U.S. hyperscalers are expected to spend roughly $916 billion on capital expenditures over the next 12 months, with consensus estimates projecting that figure to rise to nearly $1.2 trillion the year after.

Valuation and Political Risks

Niles noted that Nvidia trades at 17 times projected 2027 earnings, below the S&P 500’s multiple of 19 times. The stock fell 4% over the past two weeks, compared with a 1% dip for the broader index.

However, political headwinds persist. Gallup polling shows 71% oppose building data centers locally, a higher opposition rate than the 53% who oppose nuclear reactors.

What the Numbers Show

Wall Street expects quarterly revenue growth to slow to 13%, down from more than 20% in each of the last three quarters. This projection contrasts sharply with the 92% year-over-year acceleration in hyperscaler capital expenditure. The divergence suggests that while Nvidia’s revenue growth rate may decelerate due to its larger base, the underlying demand intensity from key customers remains at historic highs.

Newman cautioned that an earnings beat alone may not send Nvidia shares higher. With expectations already elevated, investors could punish the stock if Nvidia’s results or forward guidance fail to exceed what has already been priced in. Nvidia shares have declined following five of the company’s past six earnings reports, with the last earnings-related move of 10% or more occurring in February 2024.

Analyst Estimates

Analysts forecast second-quarter earnings per share of $2.07, up from $1.04 in the prior year’s second quarter. Shares closed 0.68% lower on Friday at $214.72 and gained 0.31% in extended trading.

Senator Elizabeth Warren has demanded that Nvidia Corp (NASDAQ: NVDA) CEO Jensen Huang testify before Congress regarding reports of the company’s technology powering Russian military drones.

The call for testimony follows a New York Times report stating that Ukrainian investigators discovered Nvidia Jetson Orin computers in the wreckage of Russian drones used in attacks near Zaporizhzhia. Ukrainian officials indicated these systems may have enabled autonomous targeting without human oversight.

Warren Criticizes Huang's Schedule

Warren took to X to criticize Huang, arguing that his recent public engagements demonstrate he can allocate time for congressional inquiries.

"If Jensen Huang has time to attend a $1 million-a-head dinner at Mar-a-Lago and fly across the world to meet with President Xi Jinping, he can find time to testify in front of Congress about reports that NVIDIA technology is powering Russia’s war machine," Warren said.

This marks an escalation from June, when Warren invited Huang to testify before the Senate Banking Committee regarding Nvidia’s China operations and US export controls. Huang declined, citing unavailability, but invited committee members to visit Nvidia’s headquarters in California.

Nvidia Denies Direct Sales to Russia

Nvidia responded to the allegations via an emailed statement to Benzinga. The company clarified that the Jetson systems found in the drones are consumer-grade products intended for students, developers, and startups.

Key points from Nvidia’s statement:

• The Jetson line was not sold directly to Russia.
• The devices were not designed for military applications.
• Nvidia cannot track secondary sales or resale markets.
• The company will take action if it determines any customer is violating US export controls.

Ukrainian defense intelligence also reported finding an Nvidia Jetson computer on a Russian S-71M Monochrome missile tested in attacks against Ukraine. One drone equipped with such a system reportedly killed three people in Zaporizhzhia on July 6.

Market Reaction

Nvidia shares closed at $208.48 on Monday, down 2.91%. In after-hours trading, the stock rose 0.20% to $208.90. Benzinga Edge Rankings place Nvidia in the 99th percentile for growth, with positive short-, medium-, and long-term price trend ratings.

What the Numbers Show

The divergence between Nvidia’s denial of direct sales and the physical presence of its hardware in active combat zones highlights the limitations of current export control tracking. While the company asserts it does not sell to Russia, the reliance on secondary market monitoring creates a gap between corporate policy and end-use reality.