In Taipei this week Jensen Huang, the boss of Nvidia, and CC Wei, the boss of the Taiwan Semiconductor Manufacturing Company, laughed as they quibbled over who was picking up the tab for dinner. It hardly mattered. The American semiconductor group and its Taiwanese manufacturing partner are minting fortunes. Between them, they’ve turned the AI boom into one of the most lucrative supply chains in history. But will it last?

The most valuable company in the world, Nvidia is the first to hit a $4 trillion market capitalisation. Its closest chip competitors are Broadcom, worth $1.4 trillion, and AMD, worth $265 billion, while Intel lags six places behind at $107 billion.

Nvidia reports its second-quarter earnings after markets close on today, and the significance of its announcements goes far beyond those who hold the stock. Some on Wall Street say its earnings are as important as the movements of the Federal Reserve. Options traders are pricing in a change of more than 6 per cent in either direction.

Nvidia’s share price has risen more than 40 per cent over the past year. With an 8 per cent weighting on the S&P 500, it will have an impact on anyone with cash in the US stock market. The S&P 500 is up 14 per cent over the past year and the Nasdaq Composite is up 21 per cent, much of this powered by Nvidia.

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Investors want to know if the company has further to go, or if the party is already over. Here are five things to watch from today’s results:

1. The numbers

Sales for the three months to the end of July are expected to be $46.05 billion, up from $44.06 billion in the previous quarter, according to analyst consensus on Factset. The same database forecasts earnings before interest, tax, depreciation and amortisation of $29.04 billion, up from $22.25 billion. Gross margin is expected to be 72.18 per cent, slightly lower than previous quarters. Earnings per share are expected to be $1.01 compared with $0.76 in April.

Analysts remain bullish. On Monday, the investment banks Baird and Stifel upped their price targets for the shares. One of the most enthusiastic, Dan Ives at Wedbush, said “demand to supply is 10:1 for Nvidia’s golden chips”, referencing research it conducted in Asia.

2. Price-to-earnings ratio

Nvidia has a price-to-earnings ratio of 33.65. This makes it expensive, but it is nowhere near as high as it has been at some points over the past few years. In November 2021 Nvidia reached a ratio of 66.4 while in May 2023 it stood at 61.

3. An AI bubble?

The question investors are trying to answer is: are AI companies experiencing a bubble, akin to the dotcom boom, and if so, when might it burst?

Nvidia is a bellwether of AI demand — no other business has come close to challenging it for producing AI chips. It is fuelled by ever-increasing spending on AI infrastructure and enormous data centres. Nvidia counts all the big tech companies as clients; 40 per cent of its sales come from Meta, Microsoft, Alphabet and Amazon.

4. China

Semiconductors are considered a strategic asset and the US has long restricted sales to China but Nvidia has circumvented this with bespoke products for export. Yet even these have had curbs, causing a dip in its gross margin in the last quarter to 60 per cent.

About 13 per cent of Nvidia’s revenue comes from China and investors are watching for an update on how Nvidia is navigating the volatile relationship between the superpowers.

In the past few weeks the company made an unusual deal with the Trump administration for permits to sell into China, in exchange for 15 per cent of the revenue. Meanwhile, Beijing has been discouraging its companies from buying Nvidia chips, steering them towards something more homegrown.

5. President Trump

Nvidia depends on the whims of the US president using semiconductors as a weapon in the US trade wars. Trump has threatened to restrict exports of chips to countries whose regulation targets US tech, which could include Europe and the UK. While this would be limiting, almost 50 per cent of the company’s sales come from the US.

In another unpredictable move, last week the US government took a stake in Intel, an Nvidia rival, albeit one running to catch up. What does that investment will mean and how much could political interference change the balance of power between the semiconductor businesses?