Is Nvidia a Buy?

Nvidia (NASDAQ: NVDA) just delivered another record-breaking quarter, sending its stock up 5% and tying Microsoft as the most valuable publicly traded company by market capitalization, at the time of this writing. Despite the strong results, questions linger as the company faces mounting geopolitical pressure and tariff uncertainty. Let's break down the chipmaker's latest performance and explore what the current challenges mean for long-term investors to determine whether Nvidia is a buy, hold, or sell.

Image source: Nvidia.

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Here are the results from Nvidia's latest blowout quarter

For the first quarter of fiscal 2026, Nvidia reported $44.1 billion in revenue, representing a 69% year-over-year increase and a 12% increase from its previous quarter, fiscal Q4 2025. Nvidia's net income totaled $18.8 billion, a 26% increase year over year, despite the company incurring a $4.5 billion charge related to new U.S. export restrictions.

As for highlights, the company's data center revenue surged to $39.1 billion in the quarter, representing a 73% increase from the prior year. Management also announced that it will be building factories in the U.S. in partnership with others to produce artificial intelligence (AI) supercomputers, which may alleviate some tariff concerns.

Additionally, Nvidia continued to return capital to shareholders, with a modest quarterly dividend of $0.01 per share, and repurchased $14.1 billion worth of shares during the quarter. Notably, the management has spent $40 billion over the past 12 months on share buybacks, decreasing its share count by just 0.8% due to the company's massive $3.4 trillion market capitalization.

Tariff twists and turns

While Nvidia continues to break records, it encountered the aforementioned geopolitical hiccup during the quarter. On April 9, the U.S. government abruptly required Nvidia to secure a license before shipping H20 chips to China. The problem? H2O was already deeply embedded in the company's go-to-market strategy and had generated $4.6 billion in revenue during the quarter. Nvidia was left holding the bag on $4.5 billion worth of unsellable inventory and was unable to ship an additional $2.5 billion in orders before the restrictions took effect.

The China market, once seen as a dependable pillar of growth, now represents a major wildcard for Nvidia. With U.S. firms locked out, Nvidia warned that losing access to this near-$50 billion AI accelerator market would materially benefit foreign competitors.

Just after Nvidia released its fiscal Q1 earnings, another twist emerged: A federal court blocked President Donald Trump from using emergency powers to impose broad tariffs. While the decision, which the Trump administration intends to appeal, may ease trade tensions for now, it highlights how quickly trade policy can shift and put the brakes on Nvidia's unparalleled growth.

Nvidia's Blackwell is its next growth driver

Despite the company's geopolitical headaches, Nvidia continues to innovate. Its Blackwell chips -- designed for massive-scale AI workloads -- are the company's next big breakthrough, according to CEO Jensen Huang. To support its growth, the company launched Blackwell Ultra and Nvidia Dynamo during its latest quarter, designed to power the next generation of reasoning AI models. Huang said:

Global demand for Nvidia's AI infrastructure is incredibly strong. AI inference token generation has surged tenfold in just one year, and as AI agents become mainstream, the demand for AI computing will accelerate. Countries around the world are recognizing AI as essential infrastructure -- just like electricity and the internet -- and Nvidia stands at the center of this profound transformation.

To support the development of its Blackwell product, Nvidia announced in April that it will build and test these chips in Arizona and its AI supercomputers in Texas. Given the company's tariff concerns, it's an unlikely coincidence that management chose the U.S. as the location for manufacturing its newest product.

Looking ahead, management projects $45 billion in revenue for its next quarter, plus or minus 2%. Notably, that outlook includes an $8 billion hit from ongoing H20 restrictions, which will continue to impact gross margins. When excluding the projected $8 billion loss, management believes it will achieve a range of "mid-70%" gross margins later in its fiscal 2026, which would be in line with its 75% gross margin for its previous fiscal year.

Is Nvidia a buy, sell, or hold?

Given Nvidia stock's meteoric rise, it still trades at a steep 45 times trailing earnings. Yet the company has largely grown into that premium, with a three-year median price-to-earnings ratio of around 63.

As a clear leader in the fast-moving world of artificial intelligence, Nvidia continues to break new ground, most recently with its next-generation Blackwell chips and AI supercomputers. For growth-focused investors seeking exposure to transformative AI technology, Nvidia remains a compelling long-term investment, even amid geopolitical risks and an elevated valuation multiple.

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Collin Brantmeyer has positions in Microsoft and Nvidia. The Motley Fool has positions in and recommends Microsoft and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.