Nvidia Forecasts Record-Breaking Growth Amid Supply Chain Bottlenecks
Nvidia recently released its second-quarter fiscal report for 2027, which provided a surprise: management outlined a growth forecast for next year. The company expects revenue to rise by more than 70% year-over-year in fiscal 2028, but this growth rate is supply-constrained due to bottlenecks in critical components such as memory and other parts of the AI chip stack.
According to Nvidia's CFO Colette Kress, demand for the company's processors is growing by more than 70%, but the current supply chain can only deliver a 70% growth rate. This means that Wall Street analysts' expectations of 44% revenue growth are too low, with implied sales for next year landing closer to $675 billion, or even $700 billion based on Nvidia's current run rate.
The significant gap between Wall Street's expectations and Nvidia's new reality is roughly $100 billion in revenue. This redefines the debate about whether the artificial intelligence build-out is late-cycle theater or still in its early innings. Moreover, it underscores that AI labs, neoclouds, enterprises, and sovereign buyers are becoming just as important as hyperscalers.
Nvidia's position in data centers remains undeniable, despite increasing competition from Advanced Micro Devices and custom silicon designers like Broadcom. The company is fighting effectively to win incremental server demand in a contested AI infrastructure landscape. A vendor in Nvidia's position does not 'need' China the way a competitor like AMD needs to prove it can expand globally at a comparable scale.
With a forward price-to-earnings ratio of about 23 and a PEG ratio of around 0.6, Nvidia stock is undervalued according to analysts. At this point, it's clear that the market is not paying up for the earnings path that Nvidia's management just outlined.