Nvidia investing 'aggressively' in R&D: Analyst explains why

Wall Street is very focused on Nvidia's (NVDA) upcoming earnings this week, especially given how much weight the tech giant has in the major US indexes (^GSPC, ^DJI, ^IXIC). While earnings paints a bit of the picture, is there more than just revenue that investors should focus on?

Stifel managing director & applied technology analyst Ruben Roy shares his insight into what investors should be watching out for from Nvidia's results.

Roy says that given investor expectations, it will need to be a beat-and-raise quarter for the chip giant.

Roy argues there is more than just earnings to look forward to: "From an R&D perspective, Nvidia is investing quite aggressively. They've accelerated the cadence at which they bring out compute technology to the marketplace. So we've got the H series of GPUs, Hopper 100, Hopper 200 out today. Nvidia you know, widely has talked about the Blackwell series which is coming out."

He follows that up with: "Just beyond that there's the new architecture that Nvidia announced earlier this year called Reuben that's coming out in 2026, so they're investing. They're investing on new technologies faster than we've ever seen."

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This post was written by Nicholas Jacobino

Video Transcript

The biggest test for the market this week.

Well, it is Invidia, the highly anticipated results that we are going to get on Wednesday after the bell.

The stock is up 100 and 60% so far this year, the chip makers earnings, are they going to spark a rally?

We wanna bring in Ruben Roy, he's Steel's managing director and applied a technology analyst, Ruben.

It's great to have you here.

So I think the big question here for so many investors is whether or not this is going to be a beat and raise quarter for NVIDIA, what do you think the set up looks like?

Hi, good morning.

Thanks for having me.

Well, I, I think it needs to be a beaten raise quarter because I think that's uh sort of built in to investor uh expectations.

Certainly the, the discussions that we're having with success uh suggest that there's widely anticipated um expectations for a beat uh for the July quarter earnings and then uh uh uh sort of a beat on the, uh the, the guidance for the October quarter.

The focus of course is gonna be on the data center segment which is where all the A I action is both for A I compute and A I networking.

And I'd say the data points coming through June quarter earnings would suggest that the A I, as you mentioned that the A I trade is still on, the investment cycle is still on the uh Capex from the cloud service providers was up higher than expectations.

And I think the guidance and outlook for most of those companies was also up as you look or the towards the back half of the year.

And then other supply chain companies like Taiwan semi, which manufactures nvidia chips or Super micro, uh which makes a lot of the the servers that are used in in the cloud service provider networks also had really, really uh significant uh beats and raises.

And so we think the set up is uh pretty strong here going into the print, you know, Ruben, as we think about what we've heard over the course of this earnings season companies who are getting out in front of their investors and their analysts and saying, well, here's why we need to spend this much because the risk of under investing in A I I mean, the the other side of that is making sure that you're getting ahead of the curve, getting ahead of the as well.

How much should NVIDIA continue to make sure that it's showing investors that it is investing itself and putting Capex towards even more of those solutions that they could bring to data centers.

Uh And, and what does that look like for investors as well here evaluating what that spend looks like going forward?

Yeah, bro, that, that is the, the biggest debate and sort of we're having with investors, which is, you know, this idea that, ok, there's a lot of investment going on today, but what's the ro I, what the R I look like and, and when we're gonna start to see some of these enterprise uh companies that are investing a lot today, make uh make money on this stuff.

I'd say, you know, on your, on your point about NVIDIA, certainly from an R and D perspective, NVIDIA is investing quite aggressively.

They've accelerated the cadence at which they bring out uh compute technology to the marketplace.

So um we've got the series of uh GP US, Hopper 100 hopper 200 out today.

Uh NVIDIA, you know, widely has um talked about the uh the, the Blackwell series, which is coming out and then we could talk about that, you know, some, some chatter in the market about potential delay and whatnot.

But, you know, that's, that's on track we think to, to really ramp in 2025.

And then just behind that, there's a new architecture that NVIDIA announced earlier this year called Ruben that's coming out in 2026.

And so they're investing, they're investing on new technologies faster than we've ever seen.

And then on the flip side, if you look at the M and a landscape, you know, there, there's a lot going on.

Early last week.

A MD announced that they were going to buy VP systems, which is essentially a manufacturer of uh you know, massive servers, A I servers that then get installed in data center networks.

And so, you know, why do they do that?

You know, well, they're, they're doing that to acquire a lot of engineers that are experts in, you know, sort of the next generation of data center architectures which are changing very, very quickly based on these computer technologies, the companies that nvidia and A and D are coming out with.

And so there's a lot going on that would suggest that the investment cycle continues.

And to your point, a lot of companies, I absolutely agree that we speak to say they'd rather over invest by a year than under invest by a quarter.