Why Is Nvidia’s 2026 Setup Strong, and Will the Fed Cut Rates in December?

TL;DR

Nvidia’s 2026 earnings setup looks strong because roughly $500 billion of booked Blackwell and Rubin business implies close to 20% sequential data center revenue growth each quarter through the end of 2026. Analyst Antoine Chikaiban says customer spending plans support that trajectory and supply constraints appear manageable. Separately, PNC economist Gus Faucher expects a 25-basis-point Fed rate cut in mid-December. Read on for the backlog, valuation, supply, and rate outlook.

Transcript

Welcome to Market Catalyst. I'm Julie Hyman. We are uh 30 minutes into the US trading day. Here's what we're watching this hour. First up, we're going to push ahead to Nvidia earnings as the AI chip giant reports results this week. We'll preview what to expect from the September jobs report and what it means for the Fed. And Bitcoin wipes out its y... Read More

Key Insights

• Nvidia has roughly $500 billion of booked Blackwell and Rubin business cumulatively over 2025 and 2026, as shared by Jensen Huang at the GTC event in Washington DC, signaling a large demand backlog for the chipmaker.
• Nvidia's booked business implies data center revenues growing close to 20% sequentially every quarter from now until the end of 2026, an upside trajectory that current consensus expectations do not reflect.
• The capex plans of Amazon, Google, Microsoft, and Meta are consistent with Nvidia's implied sequential growth trajectory, giving the bullish case support from both bottom-up backlog data and top-down customer spending.
• Nvidia stock is up about 40% this year, yet in five of the past eight earnings reports the stock fell even when the company beat expectations, showing how high investor expectations can pressure the shares.
• Nvidia's earnings power could approach $9 per share next year if it delivers on booked business, with the stock trading on a multiple in the low 20s against that number as it starts pricing in 2027 estimates.
• Supply bottlenecks across HBM memory, CoWoS packaging, AI shells, and power are viewed as manageable for 2026, with CoreWeave's shell rollout issues seen as isolated and tied to the company's scale rather than an industry-wide constraint.
• New Street's 'replatforming general theory' argues the global economy can absorb north of $3 trillion of data center capex, versus about half a trillion next year for the top four hyperscalers, leaving room for spending to grow roughly 10x by 2035.
• Fed Vice Chair Philip Jefferson said the balance of risks has shifted toward the labor market with greater downside job risks than upside inflation risks, and PNC economist Gus Faucher expects a 25 basis point rate cut at the mid-December FOMC meeting.

Questions & Answers

Q: Why does analyst Antoine Chikaiban see a strong setup for Nvidia in 2026?

Nvidia has roughly $500 billion of booked Blackwell and Rubin business across 2025 and 2026. Chikaiban says that backlog implies close to 20% sequential data center revenue growth every quarter through the end of 2026, which consensus expectations do not reflect. Spending plans from Amazon, Google, Microsoft, and Meta also support that growth trajectory.

Q: How much Blackwell and Rubin business has Nvidia booked?

Jensen Huang said at Nvidia’s GTC event in Washington, DC, that the company had roughly $500 billion of booked Blackwell and Rubin business cumulatively across 2025 and 2026. The analyst treats this backlog as a central reason for optimism about Nvidia’s earnings trajectory.

Q: What revenue growth does Nvidia’s booked business imply through 2026?

The booked business implies that Nvidia’s data center revenue could grow close to 20% sequentially every quarter through the end of 2026. According to the analyst, current consensus expectations do not reflect that degree of upside.

Q: Could supply bottlenecks limit Nvidia’s growth in 2026?

The analyst does not expect supply to become a major problem in 2026. Potential constraints include HBM memory, CoWoS packaging, powered AI shells, and electricity, but Nvidia has worked to secure supply and efficiencies may ease power requirements. CoreWeave’s shell rollout issues are described as isolated and related to its scale.

Q: Why can Nvidia shares fall even after an earnings beat?

Nvidia shares were up about 40% for the year, yet the stock fell after five of the previous eight earnings reports even though the company usually beat expectations. The discussion attributes that pattern to exceptionally high investor expectations, meaning an earnings beat alone may not be enough to lift the stock.

Q: What earnings power and valuation does the analyst see for Nvidia?

If Nvidia delivers on the booked business discussed by Jensen Huang, the analyst says earnings could approach $9 per share next year. Against that figure, the stock was trading at a multiple in the low 20s, and it could begin trading on 2027 estimates as 2026 progresses.

Q: Does the analyst believe 2026 will be the peak of the AI investment cycle?

The analyst is optimistic that 2026 will not be the peak, citing growing visibility into 2027. Amazon plans to double its data center footprint by 2027, while Microsoft has made similar comments about progressive infrastructure deployment. He also acknowledges that nobody knows exactly when an AI bubble might burst.

Q: What is the outlook for the Fed’s December interest-rate decision?

PNC chief economist Gus Faucher expects the Fed to cut rates by 25 basis points when the FOMC meets in mid-December, despite inflation remaining above 3%. Fed Vice Chair Philip Jefferson said risks had shifted toward the labor market, with greater downside employment risks than upside inflation risks, while also urging the Fed to proceed slowly.

Summary & Key Takeaways

• Nvidia reports third quarter earnings this week, after the close on Wednesday, and investors are treating the results as a test of the AI trade. Analyst Antoine Chikaiban of New Street Research is bullish, pointing to $500 billion of booked Blackwell and Rubin business through 2026 that consensus does not fully reflect.

• The booked backlog implies close to 20% sequential data center revenue growth each quarter until the end of 2026, a path consistent with the capex plans of Amazon, Google, Microsoft, and Meta. Amazon plans to double its data center footprint by 2027, and Microsoft made similar comments, supporting the view that 2026 is not the peak.

• On the macro side, Fed Vice Chair Philip Jefferson signaled risks have shifted toward the labor market while urging the Fed to proceed slowly. The delayed September jobs report arrives Thursday, and PNC chief economist Gus Faucher expects a 25 basis point rate cut when the FOMC meets in mid-December despite inflation staying above 3%.