By Arsheeya Bajwa

(Reuters) – Nvidia (NASDAQ:NVDA) is likely to report on Wednesday that its second-quarter revenue more than doubled. However, investors accustomed to its blockbuster results will expect even more from the artificial intelligence chip giant.

A beat or a miss on Wall Street expectations could either stoke or shatter an AI rally on Thursday, following Nvidia’s earnings report for the May-July period.

The company’s stock has surged more than 150% this year, adding $1.82 trillion to its market value and lifting the S&P 500 to new highs. On Monday, it was down 2.2% in afternoon trading, weighing on the index.

The stock is valued at about 37 times its forward earnings, compared to an average of around 29 for the top six tech companies on the benchmark index that includes Nvidia.

Tech heavyweights, including Microsoft (NASDAQ:MSFT), which are investing heavily to build out their AI infrastructure, have been purchasing Nvidia’s powerful graphic processing units, which enable large-scale computing quickly. These chips are challenging to replace in today’s data centers, significantly boosting Nvidia’s fortunes.

Nvidia is expected to have recorded a year-over-year jump of about 112% in second-quarter revenue to $28.68 billion, according to LSEG data as of Aug. 23.

However, its adjusted gross margin likely dropped more than 3 percentage points to 75.8% from the first quarter, impacted by the costs of ramping up production to meet growing demand.

“They’re not only a benchmark for chips, but they’re also a benchmark for AI as a whole,” said Daniel Morgan, senior portfolio manager at Synovus (NYSE:SNV) Trust, which holds shares in major U.S. tech firms, including Nvidia.

“If Nvidia misses, (investors are) going to sell off every company in AI.”

Some investors are concerned about the company’s ability to meet lofty expectations and have questioned the pace of spending on AI by Nvidia’s biggest customers.

These concerns led to a 20% slump in Nvidia’s stock through much of July and early August, though a recent recovery has left the stock about 5% below its record high in June.

More trouble may be on the horizon regarding potential production delays of Nvidia’s next-generation Blackwell AI chips. CEO Jensen Huang stated in May that the chips would ship in the second quarter, but analysts have noted design challenges that could push back this timeline.

This could mean revenue growth may experience a downturn in the first half of next year, according to research group SemiAnalysis. Margins could also face pressure if Nvidia’s chip contractor TSMC raises fees, a possibility hinted at recently by the Taiwanese firm.

Nvidia is likely to forecast a 75% surge in third-quarter revenue to $31.69 billion, LSEG data indicated, ending its five-quarter streak of triple-digit growth and reflecting tough comparisons from a year ago when revenue surged about 206% to $18.12 billion.

For the past three quarters, Nvidia’s growth has exceeded 200%.

“We’re reaching the law of large numbers here; once a company reaches a certain size, it just cannot maintain the same growth rate,” said Michael Schulman, chief investment officer at Running Point Capital.

Some analysts suggested that Nvidia could offset much of the impact from the delay in Blackwell chips by substituting those orders with its previous generation Hopper chips. The Hopper family of processors is not as powerful or lucrative as Blackwell, but it suffices for most AI applications.

Investors will also look for updates on AI processors for the Chinese market, where sales of its most advanced chips are restricted by the U.S. government.

Nvidia’s China-focused processors, reportedly named H20 and less powerful than its premium chips, could help the company capture business in a critical market where the domestic competitor Huawei is emerging.

Additionally, there are increasing antitrust concerns regarding the company’s practices. U.S. regulators are investigating whether Nvidia pressured cloud providers to purchase multiple products and if it is attempting to bundle its networking equipment with its sought-after AI chips.