The uncertainty of the U.S. economic outlook is testing investors' confidence in technology stocks, including NVIDIA.
Regarding this kind of concerns, during the weekend, Goldman Sachs analysts Toshiya Hari and Anmol Makkar, among others, stated that NVIDIA will continue to maintain its strong position in AI and accelerated computing fields, benefiting from strong demand from large cloud service providers and enterprise customers, and continue to maintain its buy rating.
The report pointed out that although the delay in shipment of the Blackwell series of GPUs has brought fluctuations to the fundamentals, according to the official statements and supply chain-related data, there is still confidence in NVIDIA's profitability. It is expected that its earnings per share in 2025 will reach $4.16, which is 11% higher than the market's general expectation.
In terms of stock price prospects, Goldman Sachs has set a 12-month target price of $135 for NVIDIA, which still has an upward space of 8.4% compared to the closing price last Friday.
AI Demand Remains Strong; The Leading Advantage is Significant
The report said that the reason for continuing to be optimistic about NVIDIA's growth prospects is mainly considering that the demand for AI infrastructure such as GPUs will remain strong.
As an upstream in the supply chain, TSMC provides OEM services for chip companies such as NVIDIA, Qualcomm, and AMD. Taking it as an example, the report pointed out that in the second quarter, TSMC's HPC (high-performance computing) business accounted for more than half of the total revenue for the first time, which means that AI demand is strong.
At the post-earnings conference call, TSMC Chairman and President Wei Zhejia also said that the tight supply of CoWoS capacity is expected to continue until 2025. The CoWoS capacity in the current and next year will at least double, also showing a strong demand prospect.
Secondly, NVIDIA will also benefit from a large customer base. The report said that NVIDIA has established a large and growing base of adoption, with a significant competitive advantage. With the accelerated iteration of GPUs, it is expected that NVIDIA will continue to maintain and benefit from the leading position in this field.
On August 28, NVIDIA will announce the Q2 financial report for the fiscal year 2025. Goldman Sachs believes the Q2 financial report will show that the demand for NVIDIA's H100 GPU will remain strong, and the H200 will start mass shipment.
Goldman Sachs estimates that thanks to the growth of data center revenue and strong operational leverage, NVIDIA's Q2 revenue and earnings per share will both exceed expectations, reaching $297.69 billion and $0.68, respectively, which are 4.1% and 5.9% higher than the market expectations.
Among them, H100, H200, and Spectrum-X will become the key drivers of Q2 revenue growth, and the ladder-like growth of TSMC CoWoS capacity may also support revenue growth from the supply side.
In terms of the data center department, Goldman Sachs expects that the department's revenue will further increase in Q3, achieving a sequential increase of 15%; by 2026, data center revenue will achieve double-digit year-on-year growth.
The Initial Investment Return Has Appeared, and ROI May Be Announced to Boost Confidence
At present, the market's main concern is whether the huge capital expenditure on AI projects can generate commercial returns.
The report shows that it is expected that the global cloud capital expenditure will grow by 60% and 12% year-on-year in 2024 and 2025, respectively, which is higher than the previous expectations of 48% and 9%.
Moreover, due to concerns about the delayed delivery of the Blackwell series of chips and the sustainability of data center revenue growth, NVIDIA's valuation has recently declined, with a price-to-earnings ratio of 42 times, which is 1% lower than the median level of the past three years and is at a historically low level.
However, the report added that some customers have provided preliminary data showing that generative AI has achieved some returns in the advertising industry. Goldman Sachs expects that after the Q2 financial report, NVIDIA will announce the return on investment indicators (ROI) of specific customers to boost market confidence.