Why Nvidia Stock Rallied Wednesday Ahead of Its Important Financial Report

Shares of Nvidia (NASDAQ: NVDA) gained ground on Wednesday, climbing as much as 5.6%. As of 11:37 a.m. ET, the stock was up 4.5%.

The catalyst that sent the artificial intelligence (AI) chipmaker higher was a report that suggested demand remained high for the company's processors in an important market.

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Good news on orders from China

One of the biggest developments for the chipmaker in recent months was the release of a next-generation AI model from start-up DeepSeek in China. The system was reportedly developed for a much lower cost than existing models. Some investors jumped to the conclusion that this would result in lower demand for Nvidia's cutting-edge AI processors, sending its stock swooning.

A report from Reuters today suggested that orders for Nvidia's H20 chips jumped as some of the biggest companies in China scramble to increase their AI offerings. The report named Tencent (OTC: TCEHY), Alibaba (NYSE: BABA), and TikTok owner ByteDance as companies that have "significantly increased" orders of Nvidia's H20 chip, which was developed to meet U.S. export restrictions to the Chinese market. Not only are these companies among the biggest users of AI in that country, but they are also among the most widely used cloud infrastructure providers in China, suggesting demand for Nvidia's chips remains strong.

We'll know more later today

This is a big day for Nvidia investors. The company is scheduled to release the results of its fiscal 2025 fourth quarter (ended Jan. 26) after the market close today. The results, as well as management's commentary during the earnings call with analysts, will provide investors with the latest insights into the continuing demand for AI and -- more specifically -- demand for Nvidia's recently released AI-centric Blackwell processor.

Management has forecast revenue growth of about 70% year over year, while analysts' consensus estimate is calling for roughly 73% growth in the quarter.

Even after notching gains of 448% over the past three years, Nvidia stock is still reasonably priced, selling for less than 30 times next year's earnings estimates. That could change after Nvidia reports today. Stay tuned.

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Danny Vena has positions in Nvidia and Tencent. The Motley Fool has positions in and recommends Nvidia and Tencent. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.