On August 20, Nvidia Corp. (NASDAQ:NVDA) denied a report by The Information claiming it planned small-batch shipments of a China-tailored LPU AI chip by year-end. This denial comes less than a week before the company reports its fiscal second-quarter results on August 26, adding one more variable to a stock that already carries enormous expectations.

The real test this earnings season is whether the growth holds up while China stays mostly closed off. Nvidia’s guidance for the quarter already assumes zero data center compute revenue from China, making any licensed sales that do show up pure upside rather than something already priced into the number.

Bull Case: Growth That Keeps Outrunning Guidance

Nvidia guided fiscal second-quarter revenue to $91.0 billion, plus or minus 2%, and its gross margin guidance sits near 75%, essentially flat with the prior quarter. This is a notable claim to make while revenue is set to nearly double year over year.

Nvidia has a history of beating its own guided range, posting $81.6 billion in revenue against a $78 billion guided midpoint last quarter. Its adjusted earnings have topped Wall Street’s estimates in each of the past four quarters.

Demand looks just as strong beyond Nvidia’s own results. SpaceX, now building its AI infrastructure exclusively on Nvidia chips and targeting 10 gigawatts of compute by the end of 2027, is estimated to spend $150 billion to $250 billion on chips to get there. Nvidia’s latest Form 13F revealed a new stake in SpaceX as the second-largest holding in its $63.4 billion investment portfolio.

Bear Case: The Math Getting Harder To Ignore

China remains the messiest part of the story. Jensen Huang said in May that Nvidia had largely conceded the country’s AI chip market to Huawei, and the back-and-forth over an LPU built for Chinese customers underscores how unsettled that relationship still is.

The guidance also embeds a real slowdown: the midpoint implies roughly $9 billion of new sequential revenue, down from about $13.5 billion added the quarter before. A slip in that 75% margin target would be a bigger warning sign than a modest revenue miss.

Nvidia’s SpaceX stake carries its own risk, too. SpaceX posted a steep loss even as second-quarter sales grew 92%, with first-half AI data center capital spending surging to $23.55 billion from $3.32 billion in the prior-year period.

What The Market Is Pricing In

Hedge fund ownership of Nvidia climbed to 275 funds from 264 the prior quarter, suggesting institutional conviction is building rather than fading. Short interest sits at just 1.26% of float, which points to very little organized bearish positioning around the stock.

As of August 20, Nvidia’s forward price-to-earnings ratio of 24.81 looks modest next to the growth still being guided to, suggesting the market isn’t pricing in much skepticism about the outlook holding.

The Number That Still Matters

Nvidia heads into its August 26 report with funds adding shares, short sellers largely absent, and a valuation that doesn’t scream excess given the growth on the table. But the guidance itself embeds a deceleration in sequential growth and assumes nothing from China, so the bulls need that margin line to hold near 75% while revenue keeps compounding.

The bears’ case rests less on China, which Nvidia has already written out of its own numbers, and more on whether the SpaceX relationship becomes a source of strength or a drag as that company burns cash and unlocks more stock.

The China chip denial itself may fade quickly, but the uncertainty surrounding Nvidia’s growth and China’s impact on its business will continue to weigh on investors’ minds.