Stop focusing on demand; the powerful supply chain behind Nvidia is the real key!

As Nvidia's earnings report approaches, Wall Street's focus is shifting from the strength of AI demand to supply capability.

According to Chasewind Trading Desk, JPMorgan pointed out in its latest report released on November 18th that the market is generally optimistic about Nvidia’s upcoming third-quarter results to be disclosed after hours on Wednesday, expecting it to once again surpass expectations and raise future guidance. However, the report emphasizes that the true highlight of this earnings, and the key to determining whether Nvidia’s stock price can further rise, will be Nvidia and its partners’ actual execution in ramping up their production capacity.

The report argues that robust demand is an unquestionable backdrop, but the AI computing power race has entered deeper waters; whether supply can be effectively expanded has become the core variable determining Nvidia’s short-term stock price trend. In the past three months, Nvidia’s stock performance has lagged the broader semiconductor sector; an earnings report that demonstrates powerful supply chain execution could be a catalyst to reverse this situation.

From “No Worries About Demand” to “Supply Is King”

According to analysis in the report, the discussion surrounding Nvidia is no longer focused on the health of demand, but whether its massive supply chain and supporting infrastructure can keep up with clients’ ambitious AI computing deployment plans.

The report makes it clear that AI demand is still “significantly exceeding supply”. Even as this wave of AI data center spending has lasted more than two years, many of Nvidia’s largest customers—including hyperscalers, neoclouds, and AI labs—continue to face limitations in computing capacity. Analysts believe this multi-year capital expenditure growth cycle is still in its “early stage”.

With such strong demand in the background, market focus naturally shifts from “how many orders” to “how much can actually be delivered”. Therefore, any comments on supply capability in Nvidia’s earnings will be more important than repeating the confirmation of demand.

Positive Signals from the Supply Side

It is worth noting that JPMorgan’s report conveys positive signals from the supply side. Facing immense demand pressure, Nvidia’s supply chain partners have shown “strong execution” in boosting deliveries of Blackwell and Blackwell Ultra rack systems over the past three to four months.

Specific data shows that in the third quarter (FQ3), output saw approximately 50% quarter-on-quarter (Q/Q) growth, and a similar pace is expected for the fourth quarter (FQ4).

Moreover, key upstream supply chain segments are also responding proactively. JPMorgan’s Asia semiconductor team has raised its production expectations for TSMC. The report points out that to respond to unexpected demand from Nvidia and key ASIC suppliers, TSMC is accelerating expansion, and by Q4 2026, monthly wafer output (wfpm) for the relevant processes is expected to increase from 95,000 to 105,000.

Market Hopes for an Earnings Catalyst, Will Stock Reverse Its Downtrend?

For investors, progress in the supply chain directly affects Nvidia’s ability to deliver on performance. JPMorgan believes the potential upside from the earnings report will “depend on how well Nvidia’s supply chain can rapidly scale in the short term to meet demand.”

Looking at the market, options markets currently anticipate about 5.9% stock volatility for Nvidia on earnings day, which is essentially in line with the average actual fluctuation of 6.0% over the past two years. This suggests the market is not pricing extreme optimism or pessimism for the earnings, leaving room for a possible upside surprise.

JPMorgan analysts maintain an “Overweight” rating on Nvidia and set a December 2026 price target of $215. The report’s strategic viewpoint holds that a strong combination of “earnings beat and raised guidance”, together with positive comments on supply capability, could clear Nvidia’s recent weakness relative to the semiconductor sector and push its stock price up more than the historical average.

Based on this logic, the bank’s strategists advise in the report that investors can consider capturing this potential upside by buying near-term Nvidia call spread options.

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The above highlights come from Chasewind Trading Desk.

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