Why We’re Sticking With Our Nvidia Price Target
While other are adjusting their targets, we're fine with ours and reiterate our One-rating.
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While Wall Street lifts its Nvidia NVDA price targets to levels in and around ours at $175, we are opting to maintain ours, following the company’s robust October-quarter earnings report and guidance that bested the consensus forecast, even if it fell short somewhat shy of more aggressive whisper number expectations. In response, NVDA shares are trading off modestly but all signs give us reason to remain owners as AI adoption continues.
Findings from Menlo Ventures show enterprise spending on AI increased sixfold in 2024 as companies began implementing AI after first experimenting with it. More telling is that 72% of enterprise IT decision-makers from companies with 50 or more employees expect to see broader adoption of AI “in the near term.”
That supports comments from Cisco CSCO and others that we are still in the relatively early innings of AI adoption. As that continues across the enterprise and consumer-facing devices, including PCs, smartphones, and other connected devices, we continue to see the need for additional data center, enterprise networking and communications infrastructure capacity. And this keeps us bullish on Nvidia as well as Marvell Technology MRVL in the TheStreet Pro Portfolio.
The next catalysts for us to watch for Nvidia will be the company’s presentation at the UBS Global Technology and AI Conference on December 3, Taiwan Semi’s TSM November revenue report in early December, and Nvidia CEO Jensen Huang’s keynote at 2025 CES on January 6. As we digest those events, we’ll revisit our $175 price target as needed. Given the current upside to our price target, we reiterate our One rating on NVDA.
Breaking Down Nvidia's Quarter and Guidance
By the numbers, Nvidia delivered EPS of $0.81 for its October quarter on $35.1 billion in revenue, up ~94% year over year, and guided the current one to $36.75 billion-$38.25 billion, compared to the $37.1 billion market consensus. The company’s Data Center business (88% of revenue) is benefiting from AI adoption and data center demand even though Nvidia’s capacity for both Hopper and next-gen Blackwell systems are capacity constrained. Paired with earnings call comments from CEO Jensen Huang that demand remains incredible as companies scale up their computing infrastructure points to demand exceeding supply for several quarters to come.
Management shared that cloud service providers, such as Amazon AMZN, Meta META, and others, were approximately half of data center sales and noted that particular revenue bucket increased more than two times year on year. We see that continuing to be strong given rising spending levels across Big Tech companies, but over time we will want to see that composition widen out for two reasons. First, it will signal wider adoption, which would be a good thing for Nvidia, and second, we know several of those Big Tech companies are working with Marvell on proprietary AI chips. Amazon’s Tranium 2 silicon is expected to be released later this year and we believe that bodes well for Marvell’s earnings report on December 3.
Getting back to Nvidia, the not-so-good news in the near term is the continued toll ramping Blackwell will take on gross margins. During the October quarter that margin narrowed to 74.6% from $75.1% in the July quarter and management sees it declining to the “low-70%,” but as production matures, it is expected to rebound to the mid-70% by mid-to-late next year.
In terms of Nvidia’s relatively small non data center businesses, Gaming revenue (9% of revenue) in the October quarter rose double-digits year over year and sequentially. The segment benefited from a combination of back-to-school sales for notebooks and desktops as well as early AI PC adoption. Automotive (1% of revenue) is being aided from continued work on self-driving auto programs while the Professional Visualization segment (1% of revenue) continues to benefit from workstation demand for autonomous vehicle simulation, AI prototype modeling, and entertainment content creation.
During the October quarter, Nvidia repurchased 92 million shares at an average cost basis of $120.65. Moving into November, the company had $46.4 billion left under its current repurchase authorization.
At the time of publication, TheStreet Pro Portfolio was long NVDA, MRVL, AMZN and META.
