Nvidia’s earnings cleared our lofty bar. Here’s our new price target on the
Nvidia shares moved lower Wednesday evening despite another beat-and-raise quarter. Simply put, the leading maker of AI chips again fell victim to the curse of high expectations. That’s not a concern to us, though, because Nvidia’s underlying fundamentals and long-term outlook appear to be as healthy as ever. Revenue surged 94% year over year to a record $35.08 billion, easily outpacing the $33.16 billion the Street was looking for, according to estimates compiled by data provider LSEG. Adjusted earnings per share more than doubled to 81 cents, exceeding the consensus estimate of 75 cents, LSEG data showed. Current quarter guidance for revenue and gross margin was also ahead of expectations, though clearly not the magnitude the most bullish of investors were hoping for (let them sell, more for us). The stock fell nearly 2% in extended trading, to roughly $143 apiece. Shares of Nvidia, the world’s most valuable company, concluded Wednesday’s session up nearly 42% since their most-recent low in early September. That marked the end of an unnecessarily steep sell-off in response to its late August earnings report. NVDA YTD mountain Nvidia’s year-to-date stock performance. Bottom line Nvidia reported a fantastic quarter Wednesday — even if guidance for the current quarter came up a bit short of the loftiest expectations, weighing on shares. It’s hard to complain about a beat-and-raise quarter just because the beat and raise wasn’t as big as some craved. Nvidia’s earnings call made it clear that we’re very much in the early innings of an artificial intelligence revolution that will fuel demand for Nvidia’s market-leading chips well into 2025 and likely well beyond that. We’re reiterating our 1 rating and upping our price target on the stock to a $165 a share, up from $150. Commentary Nvidia’s next-generation AI chip Blackwell is in “full production,” CFO Colette Kress said. And it is ramping up into fiscal 2026, which begins in earnest in February. Customers are hungry for the chips. “We will be shipping both [current-generation] Hopper and Blackwell systems in the fourth quarter of fiscal 2025 and beyond,” Kress said in written remarks. “Both Hopper and Blackwell systems have certain supply constraints, and the demand for Blackwell is expected to exceed supply for several quarters in fiscal 2026.” Some investors may consider the supply crunch disappointing because it means money is being left on the table, at least into the middle of next year. But we’re not fretting. This is almost certainly a dynamic in which sales are pushed out, rather than lost completely. For that reason, any material pullback in Nvidia shares driven by these constraints is buyable – that’s the advantage of being a long-term focused investor. Ultimately, the Blackwell orders will be fulfilled, and given the company’s efforts to update product lines on an annual basis, we’ll already be hearing about the next-generation chips by the time supply catches up with demand. CEO…
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