UBS Analysts Remain Bullish on Nvidia Ahead of Earnings Report

Investing.com — UBS analysts express optimism ahead of Nvidia’s earnings report next week, anticipating strong results and guidance that could boost the stock further.

Price Target Increase

UBS has raised its price target from $150 to $185, indicating a potential upside of more than 27% from current levels.

Revenue Forecasts

Analysts project Nvidia (NASDAQ:NVDA)'s third fiscal quarter (October) revenue to be between $34.5 billion and $35 billion, with guidance for the fourth quarter (January) around $37 billion, potentially reaching $39 billion with early 2025 results.

Margin Concerns

Analysts led by Timothy Arcuri highlight a potential 200 basis point decrease in gross margins during the first fiscal quarter, bringing them down to the 73% range. They caution that any figure reported below this could negatively impact investor sentiment.

Capex Environment

The analysts note a favorable capital expenditure environment among hyperscalers, with rising expenses likely to narrow the revenue gap between their capex and Nvidia's incremental data center revenue for 2025.

Sovereign AI Demand

UBS cites sovereign AI as a significant demand driver for Nvidia's products. They predict that spending by large sovereign states, particularly in the Middle East, could match that of major U.S. hyperscalers in the coming years.

Encouraging Indicators

Despite ongoing debates over the return on investment, UBS points to encouraging signs, such as Google's revenue growth in search and cloud, Amazon’s cost savings via generative AI, and the burgeoning use of AI across public and private sectors.

Revised Revenue Estimates

UBS adjusted its revenue estimate for Nvidia's fourth fiscal quarter from $37.3 billion to $38.9 billion, anticipating mid-teens quarter-over-quarter growth in the Data Center segment to nearly $35 billion.

Future Growth Projections

The firm expects that Data Center revenue growth will persist into the first fiscal quarter of 2026, surpassing $40 billion, driven by the launch of the new Blackwell product.

Shipment Restrictions

Regarding potential U.S. restrictions on high bandwidth memory (HBM) shipments to China, UBS sees minimal risk to Nvidia's H20 product. They believe any restrictions would likely be enforced at the “discrete module level.”