Nvidia’s (NVDA) purchase commitments and supply obligations showed significant growth for the first time in several quarters during fiscal Q2, UBS said in a note Thursday.
Analysts, including Timothy Arcuri, said one of the key positive takeaways is the roughly $10 billion increase in the company’s total supply. This includes $6.7 billion in inventory and $27.8 billion in purchase commitments. This represents a 40% increase from the previous quarter, reversing a trend of slower growth. Compared to Nvidia’s revenue guidance, the ratio of supply to revenue has increased significantly. This ratio has historically been a good predictor of future revenue growth.
“Nvidia traded down in immediate post-market trading related in part to somewhat frothy expectations around where guidance would land and what we long considered be unrealistic expectations the company had set three months ago around the timing for Blackwell volume shipments and how much revenue it would see this year,” the analysts said.
Starting in January, the new Blackwell product will be added on top of the existing Hopper product, which is expected to grow from the previous quarter, the analysts said, adding they are not worried about changes in gross margins, as data center margins should remain steady during the Blackwell cycle, just as they did with Hopper.
UBS maintained a buy rating and a $150 price target on Nvidia.