Nvidia Faces a Tale of Two Headlines: Record Highs Meet a $2.5 Billion Smuggling Probe

Nvidia faces a $2.5B chip smuggling scandal and Vera Rubin delays, but strong AI demand from Meta, Microsoft, and a $3.4B IREN partnership drive stock to record highs.

With quarterly earnings due on May 20, Nvidia finds itself juggling a mix of buoyant demand signals and a serious geopolitical headache. The stock closed Friday at a fresh 52-week high of €182.60, up roughly 7% over the past seven days and about 75% year-over-year, even as prosecutors unsealed allegations of a massive chip-smuggling operation tied to its products.

The Smuggling Investigation

US federal authorities have charged OBON Corp., a Bangkok-based entity, with illegally funneling servers packed with Nvidia chips—valued at approximately $2.5 billion—through Thailand and onward to China, circumventing export controls. Court documents name Alibaba as one of the intended end recipients, though the Chinese tech giant denies any connection to the parties involved and insists it does not use sanctioned chips in its data centers.

The case took a personal turn in March with the arrest of Yih-Shyan Liaw, a co-founder of Super Micro Computer. Prosecutors allege Liaw orchestrated a network of intermediaries, falsified shipping documents, and swapped serial numbers to mask the shipments. He faces up to 20 years in prison. Neither OBON nor Alibaba has been charged, and Nvidia has stated it expects full compliance from all partners, pledging cooperation with authorities. Despite the headlines, Nvidia shares gained roughly 1.8% on the day the story broke, while Super Micro's stock slid.

A $3.4 Billion Cloud Bet with IREN

On a more constructive note, Nvidia has inked a strategic partnership with data center operator IREN to build out AI infrastructure with a potential capacity of up to five gigawatts. Under the five-year deal, IREN will pay $3.4 billion for access to Nvidia's GPU cloud services. In a twist that deepens the relationship, Nvidia also secured an option to buy up to 30 million IREN shares at $70 apiece over the same period.

Separately, SoftBank Corp. is reportedly in talks with Nvidia and Foxconn to establish a domestic AI server production line in Japan, aiming for full local manufacturing by the end of the decade. The initiative is expected to be formally unveiled in SoftBank's medium-term management plan on May 11.

Hyperscalers Keep Spending

The demand backdrop remains robust. Meta Platforms has raised the ceiling on its capital expenditure plans to $145 billion, while Microsoft is targeting $190 billion in investments for calendar 2026—both figures that directly underpin demand for Nvidia's chips. Nvidia itself has already committed more than $40 billion in investments this year, including stakes in companies that purchase its own silicon.

Vera Rubin Delays, but Blackwell Racks Fly

Not everything is smooth on the product roadmap. Analysts at KeyBanc Capital Markets believe Nvidia has trimmed its 2026 production target for the upcoming "Vera Rubin" chip generation from two million units to 1.5 million, citing certification bottlenecks with the new HBM4 memory from suppliers SK Hynix and Micron. The impact, however, appears contained for now. The current NV72 server system, built on the Blackwell architecture, is selling briskly, with KeyBanc projecting over 60,000 racks shipped this year. The firm maintains a $275 price target on Nvidia shares.

Earnings Expectations and Historical Patterns

Wall Street expects first-quarter revenue of $78.8 billion, a nearly 79% year-over-year jump, with earnings per share of $1.77. For the following quarter, analysts forecast a further acceleration to roughly $86.6 billion in sales. Options markets are already pricing in a double-digit swing on earnings day.

Yet history offers a cautionary note: In seven of the last ten quarterly reports, Nvidia's stock has pulled back immediately after the release. The relative strength index currently sits at 52.8, and the shares trade more than 15% above their 200-day moving average. Investors will be listening closely for management's commentary on the Vera Rubin timeline and the pace of Blackwell shipments—two topics that could determine whether this earnings cycle breaks the pattern.