UBS on Nvidia: Demand and Supply Dynamics Point to 'Kingmaker' Status with $14.5B Q3 Revenue Projection

Nvidia Corp NVDA stock is on a roll as analysts rerate and boost estimates ahead of its quarterly results.

UBS analyst Timothy Arcuri maintained Nvidia with a Buy and raised the price target from $475 to $540. Ahead of Nvidia's earnings next week, August 23, the analyst substantially raised estimates.

Also Read: What's Going On With Nvidia Stock Tuesday?

Investor expectations for FY25 (CY24) EPS have risen substantially, but he recommended investors stay the course here and remain bullish amid the recent pullback in the stock over the past month. 

Demand will dictate NVDA's long-term Al revenue opportunity, but supply should be the primary determinant for its data center revenue through CY24. 

Net, Arcuri sees ~$14.5 billion as a reasonable revenue bogey for Q3 and now sees NVDA tracking to ~$10 EPS this year and ~$17 in FY25 (CY24). NVDA is quite literally serving as a "kingmaker" as a huge wave of

capital and new financing vehicles are chasing new Al software and specialized cloud infrastructure models while enterprises are still very early in a struggle to access enough capacity to build out Al at scale - this likely lasts well into next year. 

Even for more tactical investors, it still seems early to get off this train because Y/Y comps will not get tough until year-end, and the stock has rarely peaked before Y/Y.

Arcuri estimates NVDA will grow from ~6% of the ~$250 billion data center spend TAM in C2022 (cloud+enterprise) to ~25% next year, reinforcing that cloud capex budgets must rise substantially to accommodate both the Al build-out and upgrades to traditional IT infrastructure. 

Arcuri estimates EPS of $2.14 for Q2 vs $2.06 Est, $2.68 - $2.93 for Q3 vs $2.29 Est and $2.99 - $3.88 for Q4 vs $2.49 Est.

He projects EPS of $8.90 - $10.05 for Q1 FY24 vs. $7.94 Est, $12.22 - $17.25 for Q1 FY25 vs. $11.39 Est, and $12.48 - $17.71 for Q1 FY25 vs $14.04 Est.

The analyst estimates NVDA's GPU unit sell-in for CY23, CY24, and CY25 to be ~1.6 million, -3.4 million, and ~3.6 million, which includes -1.1 million, ~2.7 million, and ~1.5 million H100 units.

Wells Fargo analyst Aaron Rakers reiterated Nvidia with an Overweight and raised the price target from $450 to $500.

The price target representing ~40x his $12.60 CY25 EPS or his increasing confidence that NVDA's data center momentum coupled with software monetization can drive EPS upside and valuation support (vs. shares trading at a ~36x median NTM P/E over the past 5 yrs). 

The analyst believes a premium multiple for NVIDIA is warranted given a multiyear strong competitive positioning for data center growth driven by cloud and AI, gaming, next-generation autonomous vehicle applications, and an expanding ecosystem of products/applications (e.g., Omniverse).

Price Action: NVDA shares traded higher by 1.42% at $443.79 on the last check Tuesday.