The Case For NVIDIA Stock Rests On One Thing
NVIDIA (NVDA) has translated demand for its AI platform into rapid sales growth. NVIDIA can only sell the hardware its partners build, leaving the open risk for shareholders with component manufacturers. The company has yet to prove these suppliers can keep pace with customer appetite. This issue matters today because NVIDIA has guided to another round of higher sales for the quarter it reports next.
Management Says NVIDIA’s Suppliers Are Running Flat Out
Executives have acknowledged challenges across NVIDIA’s entire supply chain, noting that everyone involved is running flat out. This assessment emerged during the August 26, 2026 earnings call, when analysts questioned the company about demand and the most acute shortages. Discussions on that call included shortages in DRAM memory chips and wafer capacity at chip foundries. Analysts additionally brought up power and physical space for data centers, which sit outside the direct scope of parts NVIDIA buys.
On the demand side, executives stated their belief that most AI now operates as agents. For the time being, NVIDIA’s suppliers appear to set the limit on its sales just as much as its customers do.
NVIDIA Is Counting On Even More From Its Suppliers
NVIDIA has guided to revenue of $108 billion for its fiscal 2027 third quarter. This compares to the $96.2 billion reported for the fiscal 2027 second quarter. The guide sits about $12 billion above the second quarter, and manufacturers must physically build every product necessary to hit that mark. The increase follows second-quarter sales that were already up 105.9% from a year earlier. NVIDIA therefore requires even greater output from suppliers that have already had to keep up with that growth.
NVIDIA stock trades at 27.8 times its earnings over the past twelve months, against 22.7 for the S&P 500. This price appears to assume that manufacturing partners will successfully keep pace with the sales NVIDIA has guided to.
What Has NVIDIA Said About Adding Capacity?
Management notes that additional production capacity is coming online all the time, though it will not arrive all at once. The company expects better yields, which means extracting more usable chips from each wafer. Executives also say NVIDIA will work with every one of its suppliers.
These statements outline the expected trajectory for new supply. The pace at which this new supply arrives will materialize in NVIDIA’s reported sales. Measured against the $108 billion guide, the company’s fiscal 2027 third-quarter revenue is the figure to watch at its next report, expected on or around November 17, 2026.
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