Nvidia's recent GTC conference in Washington, D.C. yielded some eye-popping figures, most notably CEO Jensen Huang's claim of a $500 billion order backlog for Blackwell and Rubin GPUs through 2026. That’s a big number, even by Nvidia’s standards. The immediate reaction, of course, is to extrapolate that into a massive revenue surge, and that's precisely what the market seems to be doing. But let’s dissect this a bit.
The headline figure of $500 billion is seductive, but the composition of that number matters. According to Nvidia, this represents orders for 20 million GPUs, with 6 million already shipped (30% of the total). That leaves 14 million GPUs to be delivered over the next five quarters. Nvidia projects about $350 billion (the remaining 70% of the initial $500 billion) in revenue from those outstanding orders, translating to $70 billion per quarter.
Here's where the analysis needs to get sharper. Nvidia's Q2 2026 fiscal year revenue was $47 billion. The implication is that their most advanced GPUs alone will generate almost 1.5x their total revenue from just a few months ago. That's an aggressive ramp-up, and it hinges on several factors lining up perfectly. Are these orders firm, or are they subject to cancellation or delay? What's the average selling price (ASP) factored into that $70 billion per quarter estimate? Any fluctuation in ASP will directly impact the revenue projection.
Nvidia's valuation hinges on sustaining this kind of exponential growth. The stock has already surged nearly 40% year-to-date, fueled by the AI boom and strong earnings reports. Susquehanna recently raised its price target to $230, citing expectations for better results driven by the GB300 ramping in the second half of the year. Wedbush echoes this sentiment, suggesting that investors are underestimating the scale of AI spending. Nvidia Has One of the ‘Largest’ Opportunities Ahead. Should You Buy NVDA Stock Before November 19?
I've looked at hundreds of these projections, and this level of optimism, while understandable given Nvidia's dominance, always warrants a closer look. What happens if the demand for AI infrastructure softens unexpectedly? What if a competitor releases a compelling alternative? These are not black swan events; they're inherent risks in a rapidly evolving market.
The elephant in the room, of course, is China. Nvidia has effectively lost its share of the Chinese data center market due to U.S. export restrictions. This used to account for 20% to 25% of their data center revenue. While there's hope for a potential deal to allow sales of some GPUs, the White House has already confirmed it won't authorize sales of the Blackwell GPU to China.
The loss of the Chinese market is a significant headwind. Nvidia is thriving despite this loss, which speaks to their strength, but it also highlights the potential upside if they could regain access to that market. How much of the projected $70 billion per quarter factored in a hypothetical return to the Chinese market? The answer to that question could significantly alter the risk assessment.
Nvidia's partnership with the Department of Energy to build seven AI supercomputers is undoubtedly a positive development. The Solstice system, boasting a record-breaking 100,000 Blackwell GPUs, is a testament to Nvidia's technological prowess. However, government contracts, while lucrative, often come with their own set of bureaucratic hurdles and potential delays.
Nvidia is undoubtedly a force to be reckoned with in the AI landscape. Their technology is cutting-edge, and their market position is dominant. However, the current valuation reflects near-perfect execution and sustained exponential growth. The $500 billion order book is impressive, but it's crucial to understand the underlying assumptions and potential risks. A $70 billion per quarter revenue run rate from just advanced GPUs is a bold projection, and the absence of the Chinese market remains a significant drag. While analysts are bullish, a dose of healthy skepticism is warranted. After all, even the most promising gold rushes can have their share of fool's gold.
