Nvidia’s revenues are likely to more than double in the second quarter, but some investors are sweating. While its chips powering artificial intelligence did wonders, greatly high expectations come with huge risks. A slight miss and the stock market would surely get a shake. There are also questions about future chip production that add to the uncertainty.

Nvidia, the tech company famous for its powerful computer chips, is on the verge of announcing some big numbers for its second-quarter revenue. Many experts believe that the company’s revenue will more than double in comparison with the same period last year. That sounds great, but the catch is that investors, who witness Nvidia doing wonders earlier too, expect even better this time around. If Nvidia’s results are even the slightest bit below expectations, then it could be setting up for quite a big drop in its stock value.

Nvidia has been one of the most central companies in the world of artificial intelligence. The firm makes very powerful chips used by big technology giants like Microsoft in building some of the most advanced AI systems. This has generated a lot of interest in Nvidia’s products, and therefore, its stock has increased more than 150% in just this year. The surge in the value of the stock has spiked the market value of Nvidia to a tremendous $1.82 trillion while boosting the S&P 500, one of the major indices on the stock market, to new heights.

Despite this success, Nvidia’s stock is already very high, at about 37 times its expected future earnings. For perspective, the top six tech companies—of which Nvidia is included—are only, on average, around 29 times their expected earnings. This all means that Nvidia’s stock is really considered more expensive compared to others, and any sign of trouble could make investors nervous.

Earnings for the interim covering May-July will be made very instrumental as Nvidia is expected to beat the high expectations the Wall Street has set. It might set off further catalysts to the already rallying AI stocks, while in case results do not show as impressive a performance as was interned on the upbeat, this could be a large drop in the stock prices of companies dealing in AI.

The reason Nvidia is so important to the AI industry is that the chips are by far the best available for dealing with the huge amounts of data that AI systems require. The chips are so sophisticated that one would find it difficult to replace them in present-day data centers. So, the very large buying of them by companies building AI systems, such as Microsoft, is boosting revenue at Nvidia.

According to LSEG, the London Stock Exchange Group, Nvidia is pegged to post a year-over-year increase amounting to 112% for the Q2 to $28.68 billion. That is a humongous number as compared to the previous year, talking of the kind of demand the chips from this corporation are in. However, there is a bit of a downside. The company expects a slight dent to the adjusted gross margin, a measure of how much money Nvidia makes after considering the cost of producing its products. The reason, primarily, would be that the costs related to increasing production.

Some analysts even see Nvidia as a benchmark not for the chip sector alone but for the entire artificial intelligence space. Daniel Morgan, a senior portfolio manager at Synovus Trust, says if the company reports disappointing results, it could prompt broader selling across the entire artificial intelligence sector. Again, this is proof of just how much clout Nvidia has with the markets.

But there are also concerns now that Nvidia can keep up with these swelling expectations. Some investors are concerned that the company’s largest customers, who are spending tons on AI, might begin to slow their spend. These worries have helped send Nvidia shares down 20% in July and the first days of August. The stock hasn’t recovered, hence sitting around 5% off its peak in June.

Also another new issue that will be a headache for Nvidia is the manufacturing of the new generation AI chips that are the Blackwell, which are going to be far more powerful than the present models, but delays in manufacturing. According to Nividia’s CEO Jensun Huang, “these chips will start shipping in the second quarter” But on the deal, with some of the analysts, the design bugs are huge which might push back the release date.

If the new chips aren’t released to market on time, the firm could experience some hurt in its revenue growth, and so will the investors for the first half of the coming year. The Santa Clara firm could also see its profit margins crimped should the company’s chip manufacturer, Taiwan Semiconductor Manufacturing, or TSMC, decide to jack up its fees. Recently, TSMC hinted it might increase the cost of making chips, an event that would weigh on Nvidia’s bottom line.

Looking forward, Nvidia is expected to project a 75% hike for the fiscal third quarter, taking it to $31.69 billion. It will still be a double-digit uplift, but that will stop Nvidia’s run of triple-digit growth that has gone on for five quarters in a row. That is partly because Nvidia gained such a big surge in revenue last year that now makes it hard to grow compared to that latest bulge in quick gains.

Conclusion: By all means, seconded the post above. While there is a good chance that the strength of revenues for Nvidia will somewhat allow for the second quarter, the company has too much riding on this, and there are several headwinds likely to inhibit performance down the road. Investors will be watching closely to see if Nvidia continues to drive the AI revolution or if it is high on its horse about to stall.