Nvidia is the king of artificial intelligence, and if AI is a bubble, the company is at its center.
As long as the demand for AI continues to grow, the company can expect impressive earnings. For Q2 2026, on August 27, it reported net income of $26.4 billion, a 59% increase compared to $16.6 billion in Q2 2025.
Nvidia earnings highlights:
- Revenue growth of 56% to $46.7 billion year over year
- Gross margin of 72.4% compared to 75.1% in Q2 FY 2025
- Diluted earnings per share $1.08 compared to $0.67 in Q2 FY 2025
Nvidia outlook for Q3 of fiscal year 2026:
- Revenue is expected to be $54.0 billion, plus or minus 2%.
- Gross margin is expected to be 73.3% plus or minus 50 basis points.
- The company has not assumed any H20 shipments to China in the outlook.
Of course, experts think we’re in an AI bubble
The idea that we are in the AI bubble has garnered a lot of attention in the media recently. Let’s see what experts think.
OpenAI’s CEO, Sam Altman, admitted in his August interview with The Verge that he thinks we are in an AI bubble: “The internet was a really big deal. People got overexcited. Are we in a phase where investors as a whole are overexcited about AI? My opinion is yes.”
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Mark Zuckerberg addressed what he thinks about a possible AI bubble in an interview on the ACCESS podcast: “I do think that there’s definitely a possibility, at least empirically, based on past large infrastructure buildouts and how they led to bubbles, that something like that would happen here.”
Amazon founder Jeff Bezos has also recently discussed the AI bubble. “Bezos sees what’s happening now as an ‘industrial bubble’ more similar to the biotech bubble in the ’90s. While many investors lost a lot of money to that bubble, ‘We did get a couple of lifesaving drugs,’ he said,” writes Tony Owusu for TheStreet.
More Nvidia:
- Goldman Sachs tweaks Nvidia’s stock price target with a twist
- Fund manager drops bombshell call on Nvidia stock
- Amazon’s new Alexa feature impacts Nvidia
Gartner Senior Director Analyst Will Sommer expressed his view in a recent report: “The impending agentic AI market correction is distinct from speculative bubbles fueled by systemic financial engineering, fraud or policy, at this point, the underlying product, agentic AI, is sound, and the current market correction, where markets rationalize and consolidate, is a regular part of the product life cycle.”
Sommer continued:
However, a ‘speculative bubble’ could still form if investment becomes detached from agentic AI’s intrinsic potential to deliver tangible and commensurate economic value.
Former Intel CEO Pat Gelsinger, in an interview for CNBC’s Squawk Box, discussed the AI bubble and said, “Are we in an AI bubble? Of course!” He added that he doesn’t see it ending for several years.
And last but not least, Nvidia’s CEO, Jensen Huang, expressed his opinion on Squawk Box that AI isn’t like the dotcom bubble: “But what’s going on in the world versus what happened in 2000 is just dramatically different.”
Bank of America addresses AI doom headlines
Following what they described as “AI doom headlines,” Bank of America analysts Vivek Arya and his team updated their opinion on Nvidia shares.
Analysts said that large-scale infrastructure roll-outs inherently carry some risk of overbuilding, adding that it’s difficult to match capacity to future demand, and there’s often a technological race to build and protect existing moats or establish new revenue streams.
BoA analysts noted 4 key differences between the ongoing AI build and the prior dotcom bust:
- High utilization of AI computing power is different from the underused “dark fiber” of the dotcom bust.
- Capex intentions of top cloud service providers are on track, unlike debt-driven financing during the dotcom days.
- The U.S. Fed is more likely to lower than raise rates, unlike prior market crashes, which coincided with rising interest rates.
- Nvidia’s valuation differs from more than 100 multiple price-to-earnings ratios of dotcom leaders (such as Cisco, Nortel, and Yahoo).
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The team stated that power, water, and space considerations will likely limit the overbuilding of data centers.
They see the direct relative risk from tariff tensions between the U.S. and China to be lowest (<10% China exposure) for AI vendors, smartphone RF, and connectivity chips.
This is in contrast to other tech sectors, such as analog vendors (medium risk) and the high-risk sector: electronic design automation, intellectual property, and semiconductor capital equipment vendors.
Analysts noted downside risk factors for Nvidia:
- Weakness in the consumer-driven gaming market
- Competition with major public firms
- Larger-than-expected impact from restrictions on compute shipments to China
- Lumpy and unpredictable sales in new enterprise, data center, and autos markets
- Potential for decelerating capital returns
- Enhanced government scrutiny of Nvidia’s dominant market position in AI chips
Arya reiterated a buy rating and the target price of $235, based on 37 multiple his estimate for price-to-earnings ratio. This excludes cash for calendar year 2026, which is in the middle of Nvidia’s historical forward year price-to-earnings range of 25 to 56.
He concluded by saying that the multiple is “justified by [Nvidia]’s leading share in fast-growing AI compute/networking markets, offset by lumpiness in global AI projects, cyclical gaming market, and concerns around access to power.”
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