Nvidia (NVDA), the dominant force in AI chip manufacturing, recently announced its first-quarter results. The report, released after market close on Wednesday, revealed a surprising quarterly profit miss, a scenario once considered nearly unthinkable for the tech giant.
Despite this setback, Wall Street appears to be largely shrugging off the negative news. In fact, Nvidia’s shares saw a 5% gain before the market opened on Thursday, indicating investor confidence remains strong.
The Earnings Miss: What Happened?
Nvidia reported a shortfall of $0.12 per share, a disappointment given its recent stellar performance. The company attributed this profit miss primarily to the impact of the U.S. ban on shipments of its H20 chips to China. This geopolitical factor is significantly affecting their sales. Nvidia further projected a substantial loss of approximately $8 billion in H20 sales during the second quarter, emphasizing the ongoing impact of these restrictions.
Why Investors Remain Confident: Analyst Insights
Despite the earnings whiff, stock investors are looking past the immediate negative news. Analysts point to several key factors that are bolstering confidence in Nvidia’s future.
Strong Growth Margin Outlook
One major reason for investor optimism is Nvidia’s commitment to achieving a mid-70% growth profit margin later this year. This target was a crucial piece of information for Nvidia bulls. It reflects the company’s confidence in an efficient and robust ramp-up in the production of its next-generation Blackwell chip. This projected margin stability signals strong financial health.
“Incredibly Strong” Global Demand
Nvidia’s founder and CEO, Jensen Huang, provided a reassuring message. He emphasized that global demand for the company’s AI infrastructure products is “incredibly strong.” This high demand is a powerful indicator of continued growth, regardless of short-term challenges.
Accelerating AI Adoption
During the earnings call, Nvidia also highlighted the accelerating demand for AI usage from major hyperscalers. This includes industry giants like Microsoft (MSFT) and OpenAI, along with other large data center operators. This robust client demand underscores the fundamental strength of the AI market and Nvidia’s central role within it.
Wall Street’s Perspective: Broad Analyst Commentary
Here’s a closer look at what various Wall Street analysts are saying about Nvidia’s recent quarter:
Citi Analyst Atif Malik: Blackwell’s Rapid Deployment
- Rating: Buy (reiteration)
- Price Target: $180 (raised from $150)
Citi analyst Atif Malik views the results positively, emphasizing the rapid rollout of the Blackwell platform. Nvidia highlighted that the Blackwell launch is the fastest product launch in the company’s history. While specific contribution figures were not disclosed, comments suggest Blackwell’s impact was substantial. Malik believes that demand for Nvidia’s Blackwell chips will continue to outpace supply.
A key supplier, Wistron, anticipates a threefold increase in shipping NVL servers by June, from 100-200 units per week in the first quarter. Malik forecasts that Blackwell units will surpass 900,000 units in the July quarter, driven by faster-than-expected adoption.
D.A. Davidson Analyst Gil Luria: The China Overhang
- Rating: Neutral (reiteration)
- Price Target: $135 (raised from $120)
D.A. Davidson analyst Gil Luria points to China as the largest ongoing challenge for Nvidia. He notes that the U.S. ban on sales to the Chinese market will have a “material adverse impact” on Nvidia’s business, even beyond the immediate H20 chip ban. Nvidia estimates the Chinese market represents roughly a $50 billion total addressable market in the near future.
Without a product to serve this market, Luria suggests Nvidia is ceding this significant opportunity to homegrown Chinese manufacturers like Huawei. Jensen Huang also acknowledged China’s capability to compete head-to-head in chips and AI, despite current policy implications.
KeyBanc Analyst John Vinh: Unrivaled Market Position
- Rating: Overweight (reiteration)
- Price Target: $190 (reiteration)
KeyBanc analyst John Vinh reiterates that Nvidia remains uniquely positioned to benefit from the secular growth in AI/ML data centers. He emphasizes the significant barriers to entry created by Nvidia’s proprietary CUDA software stack, which limits competitive risks. Vinh expects Nvidia to maintain its dominance in one of the fastest-growing workloads in cloud and enterprise computing.
He also sees Omniverse, Nvidia’s platform for metaverse applications, as an emerging software subscription revenue stream that could further boost the company’s valuation as it grows and scales.
Stifel Analyst Ruben Roy: Long-Term Data Center Opportunities
- Rating: Buy (reiteration)
- Price Target: $180 (reiteration)
Stifel analyst Ruben Roy acknowledges that lost Chinese revenues will impact Nvidia’s long-term outlook. However, he remains encouraged by company commentary regarding long-tailed data center opportunities. These opportunities extend beyond just processors and accelerators to include networking infrastructure, indicating diverse avenues for future growth.
A Dip, Not a Decline
Nvidia’s first-quarter earnings miss, driven by China export restrictions, presents a temporary setback. However, the market’s positive reaction, combined with strong analyst commentary, signals robust underlying fundamentals. The confidence in Blackwell’s rapid deployment, coupled with insatiable global demand for AI infrastructure, suggests that Nvidia is well-positioned for continued dominance in the burgeoning AI landscape.
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