Why Nvidia stock is rising today after four straight post-earnings selloffs

Nvidia has spent the past year delivering one strong earnings report after another, only to see investors respond with skepticism when the results hit the market.

That pattern changed on Thursday.

Shares of the world's largest company by market capitalization jumped about 7% in premarket trading after Nvidia delivered another quarterly beat, but more importantly offered an unusually strong indication of how quickly it expects its business to grow over the next two years.

The chipmaker projected 70% revenue growth for fiscal 2028, which runs from February 2027 through January 2028.

That forecast was dramatically ahead of the 45% growth expected by analysts polled by FactSet.

The guidance offered investors a fresh reason to believe that spending on artificial intelligence infrastructure still has significant room to run, despite months of concerns that the AI boom could be approaching a plateau.

Nvidia CFO Colette Kress disclosed the forecast during the company's earnings call, while CEO Jensen Huang emphasized that demand is actually running ahead of what the company expects to be able to supply.

"We wanted to make sure that everybody has the same set of information," Huang said on the conference call.

"We've got a huge year coming up next year, and it's going to be pretty extraordinary."

"It is the case that we've never forecasted, never guided to a year in advance," Huang added.

That unusual level of visibility appears to have been one of the biggest reasons investors responded so positively.

Melissa Otto, global head of Visible Alpha research at S&P Global, said the scale of Nvidia's forecast "blew away expectations," particularly because the company does not typically provide guidance so far into the future.

"I think what wowed the market was that 70% fiscal year 2028 number that they gave that was way ahead of Visible Alpha consensus," Otto said in a Fortune report.

"I think the whole market was like, 'Whoa, 70%.'"

Data center remains the engine but diversification encouraging

Nvidia's latest quarterly numbers showed that demand for its AI accelerators remains exceptionally strong.

The company reported quarterly revenue of $96.2 billion, beating Wall Street expectations.

Data center revenue reached $89 billion, above the $86.33 billion expected by analysts, according to StreetAccount.

That represented a 117% increase from the same period a year earlier.

Data center operations now account for about 92% of Nvidia's total sales, highlighting just how central AI infrastructure has become to the company's growth story.

Overall quarterly revenue increased 106% year over year.

But Nvidia also sought to demonstrate that its customer base is becoming broader.

Its AI Clouds, industrial and enterprise, or ACIE, customers generated $40.3 billion in revenue during the quarter, up 138% from a year earlier.

The figure suggests Nvidia's growth is not being driven solely by the largest hyperscalers building massive AI data centers.

That diversification could become increasingly important as many hyperscalers are now being seen building their own chips.

Demand is still greater than supply as memory remains a constraint

The biggest constraint on Nvidia's growth may not be demand, but its ability to manufacture and deliver enough products.

"Our entire supply chain is challenged, and it's everybody; everybody is really running flat out," Huang said.

Nvidia's CEO suggested that the 70% growth forecast is effectively a supply-constrained number.

"Even though our demand is much greater than 70%, our supply allows us to confidently deliver 70%," Huang said in response to an analyst question.

That statement was particularly important for investors because it implies that Nvidia could potentially grow even faster if it can overcome manufacturing and component bottlenecks.

The company is already making major commitments to secure capacity.

Kress said commitments across Nvidia's supply, infrastructure and partner ecosystems have increased from $119 billion last quarter to $279 billion, with much of the increase related to memory procurement.

Memory availability is becoming a particular concern as demand for AI systems increases.

Margins face pressure but remain much elevated still

Nvidia's extraordinary growth has also come with unusually strong profitability for a semiconductor company.

Gross margin remained at 75% for the second consecutive quarter.

However, Nvidia expects that figure to fall to 74% in the current quarter and eventually bottom out between 71% and 72% in the fourth quarter of fiscal 2027.

Higher memory prices are expected to contribute to the pressure.

For investors, the margin outlook provides an important counterweight to Nvidia's bullish revenue projections.

The company may be selling more AI infrastructure at an extraordinary rate, but the cost of securing the components required to meet that demand is also increasing.

Still, the projected margins remain exceptionally high for a hardware company and provide Nvidia with substantial financial flexibility.

Debt becomes a bigger consideration

Nvidia's quarterly filing also highlighted a financial risk that has received less attention during the AI boom: debt.

As of July 26, the company had $33.5 billion in senior notes outstanding, alongside a $25 billion commercial paper program.

Nvidia said $15 billion of its debt is due within one to five years, compared with $2.75 billion reported in the same maturity category in its previous quarterly filing.

The company warned that its indebtedness could affect financial conditions and cash flows.

″Maintenance of our indebtedness, contractual restrictions, and additional issuances of indebtedness could cause us to dedicate a substantial portion of our cash flows from operations towards debt service obligations and principal repayments,” Nvidia said in its filing.

Analysts see more upside

The market's response suggests investors were willing to look beyond those risks.

After a historic three-year rally, investor enthusiasm for the stock has cooled this year, with shares up just 11% through Wednesday’s close, slightly ahead of the Nasdaq’s performance.

However, after the earnings, at least 10 brokerages raised their price targets on Nvidia, according to LSEG data, suggesting this might provide a breakthrough to the stock.

Morgan Stanley described the 70% growth forecast as remarkable given that the company remains supply constrained.

"70% growth supply constrained is a remarkable figure, and to the extent possible we would expect Nvidia to continue to knock down barriers to higher growth," Morgan Stanley analysts said.

The firm also identified Nvidia's push into cloud revenue-sharing as a potential additional catalyst.

Goldman Sachs raised its 12-month price target to $300 from $285, citing a "clearer path" for Nvidia to outperform the broader semiconductor sector.

The bank identified three reasons for its optimism: Nvidia's potential to exceed its fiscal 2028 growth forecast if it works with technology companies to close the supply-demand gap, a projected gross margin of 72% to 73% in fiscal 2028, and greater transparency around customer financial commitments.

Goldman analysts also said they expected management's disclosures to help investors better assess financial risks while reinforcing its commitment to return more than half of excess cash flow to shareholders.

Citigroup raised its target to $315 from $300, pointing to Nvidia's record $26 billion return to shareholders through dividends and buybacks.

The company still has about $99 billion available for additional repurchases.

Cantor maintained its $350 target, saying management had done a "great job of refocusing investors on the company's unique capabilities that will drive outsized growth."

Nvidia finally gives AI bulls what they wanted

Nvidia's latest results do more than beat quarterly expectations.

They provide a rare glimpse into what the company believes its business could look like well beyond the current AI spending cycle.

The market has repeatedly questioned whether hyperscalers can sustain the enormous capital expenditures required to build AI infrastructure and whether those investments will generate adequate returns.

Nvidia's 70% fiscal 2028 growth forecast is effectively a bet that they will.

The company's stock trades at about 17.9 times forward earnings, according to the supplied analyst data, significantly below AMD's 37.2 times and Intel's 46.2 times.

That valuation gap could give Nvidia additional appeal if investors become increasingly convinced that its growth trajectory can remain substantially above that of its peers.

For now, Nvidia is sending a clear message: the AI boom is not showing signs of running out of fuel.

The greater challenge may be making enough chips, securing enough memory and infrastructure, and managing the enormous investment required to keep up with demand.