Nvidia (NASDAQ:NVDA) checks point to significant fiscal fourth-quarter and full-year revenue upside potential fueled by strong demand for artificial intelligence compute capacity, according to UBS.
The brokerage increased its price target on the chipmaker to $850 from $580 and reiterated a buy rating on the stock in a research note emailed Tuesday. Nvidia is expected to report results for the fourth quarter of its fiscal 2024 period on Feb. 21.
UBS sees Nvidia beating data-center revenue estimates by $2.5 billion to $3 billion. UBS estimates data-center revenue of $19.45 billion, implying sequential growth of 34%. The consensus view is for data-center revenue of $16.77 billion. The brokerage also expects total fourth-quarter revenue of $22.95 billion versus the Street’s $20.23 billion view.
“Customer discussions confirm Nvidia’s lead times have come in substantially over the past few months, meaning shipment slots are still available in (the second half of 2024),” analysts Timothy Arcuri and Carlos Colorado wrote. “Normally, this is bad, but demand for AI compute capacity is still so strong, in the near term, we think this just points to significant upside potential to shipments [and] revenue.”
The analysts raised their fourth-quarter adjusted earnings per share forecast to $5.31 from $4.75 and their full-year target to $13.12 from $12.55. The consensus is for fourth-quarter EPS of $4.53 and full-year EPS of $12.33. They also lifted their 2025 and 2026 EPS projections by 16% and 33%, respectively.
For the first quarter of fiscal 2025, UBS is modeling total revenue of $26.07 billion and EPS of $6.15, which are “well above” the respective market views of $21.5 billion and $4.85, the analysts said. The brokerage expects data-center revenue to jump 17% quarter over quarter to $22.73 billion in the ongoing quarter, above the consensus view of $18.2 billion. It is forecasting double-digit-percentage data-center compute and networking gains that would be partially offset by a 6% sequential decline in gaming revenue to $2.55 billion, which is narrowly below consensus.
UBS continues to see a next 12 months price-earnings multiple at the low end of where Nvidia has historically traded due to concerns around potential data-center capacity constraints. This could start to hurt revenue, though possibly more in 2026 than in 2025 as originally expected, the analysts said.
The brokerage is weighing these reservations against the fact that Nvidia’s demand pool is growing. UBS increased its next 12 months P/E multiple to 25-times from 23-times.