Nvidia Corp (NASDAQ: NVDA) is scheduled to report its Q2 earnings today, after the bell. Ahead of the release, the semiconductor stock is keeping comfortably in the green.
NVDA’s quarterly release is significant since it could set the direction more broadly for AI stocks. Consensus is for the chipmaker to record a 45% year-on-year increase in earnings to 94 cents per share in Q2.
Analysts also expect the AI bellwether to see its revenue surpass $46 billion (about 5.0% sequential growth) in the second quarter. Still, seasoned tech investor, Paul Meeks, says now may not be the best time to invest in Nvidia stock.
Why Nvidia stock shouldn’t be bought ahead of Q2 earnings
In a recent interview with Schwab Network, Meeks expressed confidence that NVDA will come in ahead of Street estimates in its fiscal second quarter.
He’s even convinced that the AI darling will offer upbeat guidance for the future as well. However, investors should practice caution in initiating a new position in Nvidia shares at current levels as “they’re trapped in this trade negotiation between the US and China.”
The multinational has already agreed to share 15% of its China revenue with Trump administration in exchange for a license to sell its lower-power chips to Beijing.
But China has recently rejected them due to “security risk”, which, according to Meeks, is a tactic to “negotiate for higher end chips.”
Amid this back-and-forth, though, “I can’t recommend starting a fresh position when NVDA stock is already trading at an all-time high,” he noted.
But NVDA shares remain an attractive long-term play
Nvidia stock is currently trading at a premium forward price-to-earnings (P/E) ratio of 44 – which means it has “little margin for error” heading into the Q2 print, according to a Saxo Bank strategist.
“If growth slows or margins disappoint, the downside could be sharp,” he added in a research note. Note that Nvidia had previously flagged an $8.0 billion hit due to Sino-US tensions in the second quarter.
However, much of the risks and related volatility remain a concern for the near-term only. For long term investors, the AI narrative behind NVDA shares remain intact and will drive them up to over $200 “when the day is done,” Meeks added in the interview.
His forecast indicates potential for another 10% upside from current levels. Note that Nvidia also pays a tiny dividend yield of 0.022% at the time of writing.
How Wall Street recommends playing Nvidia
In conclusion, Paul Meeks continues to believe in the long-term potential of Nvidia shares – but sees buying on the dip as a better way to play them.
Wall Street agrees with his bullish stance on NVDA stock as well. The consensus rating on the AI stock currently sits at “buy” with price targets going as high as $270 – indicating potential upside of roughly 50% from here.
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