Nvidia (NVDA 2.81%) shares had a slow start to the year, but a strong rally that began in early April now has them up by about 30% year to date. Whether that momentum can continue will greatly depend on what the artificial intelligence (AI) leader has to say when it reports fiscal second-quarter earnings on Aug. 27.

Nvidia more than doubled sales last year, but maintaining that level of growth would be difficult. Insatiable demand for its leading AI hardware is bound to wane as customers build inventories and competitive chips begin to appear. Yet the tech giant doesn't need to achieve that level of sales growth for it to still be a great investment at its recent price level.

Here's the data point to watch to see if growth remains strong enough to justify buying Nvidia stock now.

View of Nvidia headquarters lit up at dusk.

Image source: Nvidia.

Signs still point to strong demand for Nvidia chips

Although Nvidia stock rallied strongly over the past several months due to several catalysts, investors turned somewhat negative earlier this year when its China business was effectively shut down.

The fear was the impact of lost revenue from China sales due to export restrictions. Nvidia took a $4.5 billion charge in the fiscal first quarter for its H20 inventory and canceled sales due to new rules restricting sales to China. The H20 chip was designed specifically for the China market after previous export rules were put in place.

But now China looks to be another tailwind for AI chip sales after further changes on tariffs and trade with the country. Recent reports say Nvidia has ordered 300,000 H20 graphics processing units (GPUs) to be manufactured by contract supplier Taiwan Semiconductor Manufacturing. That's a meaningful number of chips. For perspective, Nvidia sold about 1 million H20 chips in 2024.

Those sales will be in addition to a booming environment of demand for Nvidia's most powerful Blackwell chips as data center growth expands globally. Nvidia systems will support AI data center projects already in the works with Saudi Arabia, Indonesia, European nations, as well as the $500 billion Stargate Project in the U.S.

Drilling down on Nvidia's sales

That all leads to what investors should specifically be monitoring when Nvidia next reports earnings on Aug. 27. All of the ongoing data center growth will lead the next wave of sales for Nvidia's leading chips and software. That follows a year where big tech and AI companies helped boost Nvidia's record revenue growth by 114% year over year.

Revenue growth has slowed from initial levels, though. It has still been increasing every quarter, but quarter-over-quarter increases leveled off to about 15% as the chart below indicates. The loss of China sales then reduced the most recent quarterly growth to just 10%.

bar chart showing Nvidia quarterly data center revenue growth for past two years.

Data source: Nvidia earnings releases. Chart by author.

Four consecutive quarters of 15% growth would represent a 75% annual growth rate. That's stellar sales growth and even more impressive for a megacap company like Nvidia.

That's the metric from Nvidia's earnings reports investors should focus on. If fiscal Q1 was an anomaly due to the China sales disruption and quarterly growth reaccelerates, Nvidia is going to look like a cheap stock even at recent levels.

The biggest question will be how long its growth runway can continue. That can only be answered by CEO Jensen Huang and the commentary from the quarterly report. Investors should listen for those hints, too, but the quarterly data center growth itself should be the most important financial metric to continue to watch from Nvidia.