Nvidia earnings: Wall Street grows more bullish on the ‘AI ecosystem of choice’

Feb 22, 2024

Nvidia (NVDA) once again surpassed Wall Street’s lofty expectations with its latest earnings report.

For the quarter, Nvidia reported adjusted earnings per share (EPS) of $5.16 on revenue of $22.1 billion. Analysts were expecting EPS of $4.60 on revenue of $20.4 billion. The numbers represent significant increases from last year’s results in the same period. Earnings rose more than 486% while revenue was up more than 262%.

The company also guided higher than analysts’ expectations for the first quarter, saying it anticipates revenue of $24 billion, plus or minus 2%. Wall Street was expecting $21.9 billion for the quarter.

Wall Street reacted with a slew of boosted price targets and overall bullish sentiment on the stock that rose double-digits on Thursday following its earnings release. The median price target on the stock rose 19% following the report.

Below is a collection of what Wall Street is saying about Nvidia after its fourth quarter earnings release.

Toshia Hari, Goldman Sachs, Buy rating, price target $875 (from $800)

“Nvidia delivered against what was seemingly a very high bar with Data Center once again serving as the key growth driver. Looking ahead, despite the [greater than three times year-over-year] increase in Data Center revenue in FY2024, we model another [greater than two times year-over-year] increase in FY2025 as we expect not only sustained growth in Gen AI infrastructure spending by the large [Communication service providers] and consumer internet companies, but also increased development and adoption of AI across enterprise customers representing various industry verticals and, increasingly, sovereign states.”

Vedvati Shrotre, Jefferies, Buy rating, price target $780 (from $610)

“We’ve observed that computing eras are typically dominated by a single ecosystem that is provided by a single, vertically integrated chip+hardware+software company, like IBM in mainframes and Apple in smartphones. NVDA’s strong commentary regarding use for GPUs for inference and training workloads foots with our field checks that NVDA has become the AI ecosystem of choice. We think many investors continue to underestimate the amount of investment NVDA has poured into its ecosystem, and the lead that has given the company in the market, which has translated to a virtuous circle of software developers and platform suppliers embracing NVDA as the ecosystem of choice for AI workloads.”

Vivek Arya, Bank of America, Buy rating, price target $925 (from $800)

“Perhaps the most important new datapoint in NVDA’s earnings call was that AI inference contributed nearly 40% of AI computing mix in FY24/CY23. AI inference is correlated with revenue bearing AI which is supposed to be more competitive, as opposed to AI training which NVDA already dominates. Second, we highlight the company’s positive commentary around tight supply, low China dependence (only mid-single digit percent of data center sales versus 20%-25% prior to restrictions), new pipeline, rising sovereign demand for AI among others.”

Timothy Arcuri, UBS Investment Bank, Buy rating, price target $800 (from $800)

“There were a few items that could maybe suggest some slowing revenue growth on the horizon (mostly supply and opex) but we will have to see how these evolve. The bottom line is that we are still in such early stages of what is possible with AI (especially health care/drug discovery) and NVDA is the de-facto global AI platform, it seems too soon to take a more cautious view. We are trimming estimates a bit to reflect some potential slowing in revenue growth and price target goes from $850 to $800 but we maintain our Buy.”

Harlan Sur, JPMorgan, Overweight rating, price target $850 (from $650)

“The [Nividia] team noted that demand will continue to outstrip supply through CY24, allaying fears of an inventory build/correction in the 2H of the year. The team feels constructive on the sustained growth into CY25+ driven by transition to accelerated computing, proliferation of generative AI applications, and build-out of sovereign AI.

“The team provided examples of the strong AI monetization from their customers ( e.g. ServiceNow drove their largest ever net-new annual contract value contribution, Microsoft 365 Copilot grew faster in its first two months than the two previous major Microsoft 365 enterprise suite).”

Atif Malik, Citi analyst, Buy rating, price target $820

“Nvidia expects AI demand to remain strong and above supply through the year. China was down sharply due to US restrictions…Inference sales were 40% of data center sales last year and the company expects data center infrastructure installed base of $1T to double over the next five years. While [Year-over-Year] data center comps could pose a headwind for the stock, long-term earnings power looks attractive based on our $200B compute TAM by 2027.”

Gil Luria, DA Davidson, Neutral rating, price target $620

“While FY2025 will be a terrific year for NVIDIA, we believe that FY2026 and beyond may not see continued growth. Messaging from the four largest customers suggests that they’re accelerating spend this year to meet current demand but are characterizing their purchasing as demand-driven, implying the possibility of scaling down compute spend once we approach the trough of disillusionment. We believe that customers like Microsoft are not interested in indefinitely sustaining this level of Capex dedicated solely to AI compute, yet alone NVIDIA. Consequently, we believe our FY26 and FY27 estimates reflect a Street low, as we see potential for a sequential decline in NVIDIA’s data center business starting sometime over the next 4-6 quarters. We are raising our target to $620 from $410 to reflect a higher cyclical peek this year than we previously estimated.”

Ruben Roy, Stifel, Buy rating, price target $910 (from $865)

“As questions regarding the sustainability of NVDA’s growth increase, we found management commentary on revenue diversification notable. In addition to continued growth of Networking and Software NVDA’s overall Data Center revenue is increasingly diversifying across industries and regions, including a growing contribution from demand related to sovereign AI deployments. This diversification, in our view, is likely to continue as AI-related [return on investment] for end users accelerates. NVDA continues to believe that the migration from general purpose compute to accelerated compute represents a $1 trillion opportunity, longer-term…We continue to expect NVDA to be the primary beneficiary of AI infrastructure deployments over the next several years. Despite supply improvements across NVDA’s product set, management continues to see strong demand over the medium-term with expectations for demand to continue to outstrip supply of new products.”

Ananda Baruah, Loop Capital, Buy rating, price target $1,200

“We believe NVDA could be looking at a $150B GPU opportunity in CY2024. A key difference in our view vs. Street (we believe) is our work regarding high-end Data Center GPUs where we see NVDA tracking towards 5.0M for CY2024/FY2025 and 6.5M+ for CY2025/FY2026. It is our belief that Street (through investor conversations) is positioned at 4.0M – 4.5M TOTAL Enterprise & Data Center GPUs for CY2024 / FY2025.”

ANKARA, TURKIYE - NOVEMBER 23: In this photo illustration, Nvidia logo is displayed on a mobile phone screen in front of a computer screen in Ankara, Turkey on November 23, 2023. (Photo by Ahmet Serdar Eser/Anadolu via Getty Images)

ANKARA, TURKIYE – NOVEMBER 23: In this photo illustration, Nvidia logo is displayed on a mobile phone screen in front of a computer screen in Ankara, Turkey on November 23, 2023. (Photo by Ahmet Serdar Eser/Anadolu via Getty Images) (Anadolu via Getty Images)

Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.

Click here for the latest stock market news and in-depth analysis, including events that move stocks

Read the latest financial and business news from Yahoo Finance

Leave a comment