KeyBanc Boosts Nvidia Target Despite Production Hurdles, Eyes Strong Earnings

KeyBanc has expressed confidence in Nvidia's upcoming quarterly financial performance, despite production constraints affecting its GB200 NVL servers. The investment firm has reiterated its "overweight" rating on Nvidia and raised its target price from $180 to $190, ahead of the company's earnings announcement next week.

John Vinh, an analyst at KeyBanc, highlighted in a client report that while concerns over the GB200 NVL server's production ramp-up remain, Nvidia is expected to deliver stronger-than-anticipated results for the fourth fiscal quarter. Additionally, the company is anticipated to provide conservative yet above-consensus guidance for the first fiscal quarter.

Vinh elaborated that although production limitations for the GB200 NVL server racks have indeed affected shipment volumes, several mitigating factors are at play. The initial low yield of the GB200 NVL has allowed customers to defer their orders and compensate with x86 head node-equipped, HGX-based B200 servers. Moreover, a surge in demand from Chinese cloud service providers, driven by an increase in DeepSeek requirements and restrictions on Huawei's Ascend AI chips, has led to a substantial procurement of H20 GPUs.

Nvidia's relationships with cloud service providers, particularly those utilizing EMS contractors for financing inventory, have proven beneficial. Shipments to EMS contractors can be recorded as actual sales revenue. As Nvidia prepares to release its financials on February 26, market consensus forecasts revenues of approximately $26.04 billion with earnings per share anticipated at $0.61.