Nvidia Corp NVDA will report its fourth-quarter results on February 21. Analysts offered their take on the upcoming results.
Wedbush analyst Matt Bryson maintained Nvidia with an Outperform and raised the price target from $600 to $800.
The analyst noted that Nvidia will surpass estimates again and raise future guidance. During his mid-December travels in Asia, component suppliers and Original Design Manufacturers (ODMs) indicated strong quarter trends.
They predicted further growth in the first quarter, with potential concerns about Cloud Service Providers (CSP) growth slowing in late 2024.
However, recent earnings reports from CSPs show continued momentum in AI infrastructure spending, with many large data center operators planning to increase capital expenditure in 2024, primarily for AI investments.
Bryson’s recent discussions with memory vendors revealed a continued high demand for High Bandwidth Memory (HBM), with Nvidia expected to be the largest consumer of these components in 2024.
The fourth quarter also saw significant capital raises for AI startups, which will likely benefit AI infrastructure providers either through direct purchases of AI systems or by renting AI infrastructure.
Super Micro Computer Inc SMCI reported a significant sales acceleration during the quarter, with growth in backlog driven by AI sales.
His recent talks with other major server Original Equipment Manufacturers (OEMs) echoed similar sentiments, noting improved sales momentum and increasing backlogs.
Bryson projected fourth-quarter revenue and EPS of $20.01 billion and $4.48.
Oppenheimer analyst Rick Schafer reiterated an Outperform on Nvidia with a new $850 price target (prior $650).
The analyst projected upside in Nvidia’s fiscal fourth quarter and first quarter results, primarily driven by data center investments from CSPs and enterprises in accelerated computing.
Schafer expects packaging constraints, particularly with Chip on Wafer on Substrate (CoWoS), to ease throughout the year.
The analyst stated that Nvidia’s comprehensive hardware/software platform underpins a broad AI ecosystem.
The company has begun shipping its L40S GPU for enterprises and sees the Grace CPU as another significant opportunity.
With an anticipated gross margin increase of 50 basis points to 75.5% in the fiscal fourth quarter, Nvidia has shown remarkable performance, up 47% year-to-date, outpacing the SOX index’s 9% increase, the analyst flagged.
Currently trading at 29 times his calendar year 2025 estimated EPS, below its five-year average of 36 times, Nvidia stands out for its best-in-group gross and operating margins, representing the most direct large-scale investment in AI’s growth.
The sustained structural growth, particularly in data center AI as the accelerator attach rate will likely reach 40-50% in the cloud within the next 4-5 years (up from 20% today), underscores Nvidia’s dominant position in the data center AI ecosystem, which is crucial for generative AI adoption.
Schafer maintained a long-term buy position on Nvidia, and projected fourth-quarter revenue and EPS of $21.2 billion and $4.79.
BofA analyst Vivek Arya reiterated a Buy rating with a price target of $800.
Arya attributed potential discrepancies with these bullish expectations to supply issues, like memory and packaging, rather than demand or competition.
He expected any stock volatility to be brief, mainly as attention turns to Nvidia’s GPU Tech Conference (GTC) scheduled for March 18-21, which will provide essential updates on the pipeline, partners, and AI Total Addressable Market (TAM).
Nvidia’s market cap has soared to $1.8 trillion, ranking it behind only Microsoft Corp MSFT and Apple Inc AAPL in the S&P 500 index, reflecting a combination of investor enthusiasm for AI.
Nvidia’s alignment with U.S. Department of Commerce restrictions on shipments to China has also removed significant uncertainties.
Arya flagged four factors driving AI TAM towards the $250-$500 billion range.
No primary internet service provider is likely to cut spending on AI, risking falling behind. Sovereign AI initiatives are creating new demand. Enterprises are beginning to explore genAI, with significant on-premises spending expected to surge in 2025.
Pricing and content present additional revenue opportunities for Nvidia, with the upcoming B100 products anticipated to be priced 10%-30% higher than the current H100 series.
Price Actions: NVDA shares traded higher by 1.90% at $740.38 on the last check Wednesday.
Also Read: Broadcom Sees Boost from Tiger Global’s Entry, Signaling Confidence in AI Semiconductor Market
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