UBS Reiterates Buy Rating on NVIDIA (NVDA)
UBS analyst Timothy Arcuri reiterated a Buy rating and $150.00 price target on NVIDIA (NASDAQ: NVDA).
The analyst comments "We reiterate Buy after the aftermarket pullback in the stock as NVDA's purchase commitments and supply obligations - the most important metric we watch, and historically a harbinger of future growth - grew significantly for the first time in several Qs. FQ3 guidance of ~$32.5B was maybe a touch below investor expectations and the implied FQ4 (Jan) gross margin is down a few 100bps Q/Q, but this is not only missing the forest for the trees, but also wholly consistent with what NVDA was suggesting last call as Blackwell will have lower margins out of the gate given its complexity. The setup here was also a little complicated because NVDA set what we long considered (here, here, and here) to be an unrealistic Blackwell shipment timeline on its last earnings call. With this all finally rightsized, the most important takeaway from this call is the ~$10B (~40% Q/Q) increase in what we consider to be NVDA's aggregate supply after having been flat in FQ4 and up only 15% last Q (see Figure 2NVDA Suplyvs RenuAalysi). We believe this foreshadows very strong revenue growth over the next few Qs - starting with FQ1 (Jan) as Blackwell will layer on top of Hopper (which based on our supply chain checks will be up Q/Q even as Blackwell starts to ship). We are also not worried about gross margin and see data center margins being fairly consistent across the Blackwell cycle as during the Hopper cycle. Lastly, we believe it is still too early to start discounting a peak as major CSPs are still indicating to us demand upside and lengthening duration of capacity commitments from their customers - none of which suggests we are close yet to things rolling over. Net, we make slight changes to our model but C2025/2026e EPS remains unchanged at $4.87/$5.67, PT remains $150, and we maintain Buy."
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Shares of NVIDIA closed at $125.68 yesterday.