NVDA Stock Heads to $150 on Capex, Cash Flow Risks Despite the Strong Earnings
Shares of Nvidia dropped as investors questioned the sustainability of AI capital spending and long-term cash flow trends, despite...
Quick overview
- Nvidia reported strong earnings driven by demand for its Blackwell and Rubin GPUs, but shares fell due to concerns over the sustainability of AI capital spending.
- CEO Jensen Huang emphasized growth in AI inference, which strengthens Nvidia's competitive position against rivals.
- Investor focus has shifted from short-term performance to long-term cash flow and capital discipline amid uncertainty regarding Nvidia's deal with OpenAI.
- The stock's technical indicators show weakening momentum, suggesting potential for a deeper pullback despite the long-term uptrend.
Shares of Nvidia dropped as investors questioned the sustainability of AI capital spending and long-term cash flow trends, despite the company’s continued solid earnings beat led by Blackwell and Rubin GPUs.
Beat and Raise — But Sentiment Shifts
Nvidia once again posted a powerful “beat and raise” quarter, exceeding expectations and lifting guidance as demand for its Blackwell and Rubin GPU architectures remained robust. Customers such as Microsoft Corporation and Amazon.com, Inc. have signaled higher data center spending, reinforcing the strength of AI infrastructure demand.
However, despite the positive numbers, NVDA stock moved lower. The debate has shifted away from near-term performance and toward broader concerns surrounding the sustainability of AI capital expenditures, potential cash flow compression, and long-term monetization of AI workloads.
Inference Growth Strengthens Competitive Moat
During the earnings call, CEO Jensen Huang highlighted accelerating growth in AI inference—the stage where trained models are deployed into real-world applications. Inference had previously been viewed as an opening for rivals such as Advanced Micro Devices, Inc. and Broadcom Inc. to capture incremental market share.
Instead, Nvidia’s expansion into inference, supported by its tightly integrated software ecosystem, suggests switching costs remain elevated. This reduces the pace at which competitors can realistically erode Nvidia’s dominance in AI acceleration and networking.
Still, investors were seeking deeper clarity on demand durability rather than just another strong quarter.
OpenAI Deal Uncertainty Adds Pressure
Additional uncertainty stems from reports that discussions between Nvidia and OpenAI have slowed. Nvidia had previously indicated potential investment support for large-scale AI infrastructure projects.
However, Huang later described any proposed investment as non-binding and preliminary. He also reportedly expressed reservations about OpenAI’s business model and intensifying competition from Google and Anthropic.
While Nvidia’s fundamentals remain strong, investor focus has clearly moved beyond earnings beats to questions about long-term capital discipline, competitive dynamics, and sustainable free cash flow generation.
Technical Picture Reflects Waning Momentum
Nvidia’s technical setup mirrors the shifting sentiment. The stock has slipped below its 20-week simple moving average (gray), a level that previously provided reliable support. That average has now turned into resistance, rejecting recent rebound attempts.
NVDA Chart Weekly – The 20 SMA Has Turned Into Resistance
Momentum indicators have weakened, and market participants are increasingly discussing the possibility of a deeper pullback toward the 50-week moving average (yellow). While the long-term uptrend remains intact, short-term control has shifted toward sellers.
📊 NVIDIA Q4 & Fiscal 2026 Financial Highlights
🔹 Gross Margins
- Fourth Quarter:
- GAAP gross margin: 75.0%
- Non-GAAP gross margin: 75.2%
Full Fiscal 2026:
- GAAP gross margin: 71.1%
- Non-GAAP gross margin: 71.3%
➡️ Q4 margins expanded versus the full-year average, reflecting strong product mix and AI-driven demand.
🔹 Earnings Per Share (Diluted)
Fourth Quarter:
- GAAP EPS: $1.76
- Non-GAAP EPS: $1.62
Full Fiscal 2026:
- GAAP EPS: $4.90
- Non-GAAP EPS: $4.77
➡️ Quarterly earnings outpaced the fiscal-year average, underscoring continued strength in data center and AI segments.
🔹 Capital Return to Shareholders
- Total capital returned in Fiscal 2026: $41.1 billion
- Via share repurchases and cash dividends
- Remaining share repurchase authorization: $58.5 billion (as of Q4 end)
➡️ Strong free cash flow continues to support aggressive buybacks and shareholder returns.
🔹 Dividend Announcement
- Next quarterly dividend: $0.01 per share
- Payment date: April 1, 2026
- Record date: March 11, 2026
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