Nvidia’s stock experienced fluctuations on Thursday as investors digested the nuances of the AI chipmaker’s latest earnings report, which, while impressive, raised some eyebrows regarding future projections. The Santa Clara, California-based company released its fiscal third-quarter results late Wednesday, surpassing expectations but offering a sales forecast that was only modestly above analysts’ predictions. This cautious guidance led to a dip in Nvidia’s stock during after-hours trading following the earnings announcement.
On the stock market today, Nvidia shares managed to rise by 0.5%, closing at $146.67. However, the trading session was marked by volatility, with the stock swinging from a decline of 3.6% to a peak increase of 4.8% during intraday trading. This rollercoaster performance reflects the mixed sentiments among investors, who are weighing the company’s strong past performance against its more tempered outlook.
Despite some reservations, the majority of Wall Street analysts responded positively to Nvidia’s earnings report. At least 18 analysts raised their price targets for Nvidia stock in the wake of the fiscal Q3 results. Wedbush Securities analyst Daniel Ives noted that Nvidia’s guidance tends to be conservative, suggesting that the company has a history of “underpromising and overdelivering.” This sentiment was echoed by Bernstein analyst Stacy Rasgon, who maintained an outperform rating on Nvidia stock and increased his price target from $155 to $175. Rasgon acknowledged that while the outlook might not have met the most optimistic expectations, it remained respectable given the ongoing supply constraints.
Nvidia’s forecast appears conservative, particularly in light of the increased sales projections for its Blackwell chips in the current quarter and the sustained demand for its Hopper chips. The company confirmed that it is now in full production of Blackwell, its next-generation artificial intelligence chip. Rasgon highlighted that the demand for Blackwell is “off the chart” and likely to exceed supply for the foreseeable future, indicating a robust outlook for the data center market.
However, one area of concern for investors was Nvidia’s guidance regarding gross profit margins. The company anticipates a decline in gross margins during the ramp-up of Blackwell production, projecting margins to dip to the “low 70s” early in the fiscal year before rebounding to the “mid 70s” later on. This forecast, coupled with a gross margin of 74.6% in fiscal Q3, raised questions among some analysts about the sustainability of profitability.
Truist Securities analyst William Stein maintained a buy rating on Nvidia stock while adjusting his price target from $167 to $169. He characterized Nvidia’s fiscal Q4 revenue guidance as “just good” rather than “great.” Melius Research analyst Ben Reitzes also retained a buy rating, with a price target of $195, asserting that Nvidia would not lose Blackwell chip sales to competitors due to supply constraints. He emphasized that the unique nature of Nvidia’s technology means customers cannot easily switch to alternative chips without sacrificing performance.
JPMorgan analyst Harlan Sur concurred with this assessment, stating that Nvidia continues to hold a significant lead over its competitors in terms of its silicon, hardware, software platforms, and overall ecosystem. Sur rated Nvidia stock as overweight and raised his price target from $155 to $170.
During a conference call with analysts, Nvidia’s Chief Financial Officer Colette Kress emphasized the staggering demand for Blackwell chips, stating that the company is “racing to scale supply to meet the incredible demand customers are placing on us.” This strong demand not only bodes well for Nvidia but also has positive implications for other companies in the AI data center market.
Evercore ISI analyst Amit Daryanani noted that Nvidia’s fiscal Q3 report could have favorable read-throughs for several other stocks linked to the AI data center ecosystem, including Amphenol, Arista Networks, Dell Technologies, Hewlett Packard Enterprise, and Vertiv. This interconnectedness highlights the broader impact of Nvidia’s performance on the technology sector as a whole, suggesting that the company’s success could bolster the fortunes of its partners and suppliers in the AI space.
