Nvidia Upgraded to Buy Amid Bullish AI Market Prospects and Revenue Growth

HSBC upgrades Nvidia to Buy, citing strong growth prospects in AI GPU market. Fiscal 2027 data center revenue estimates revised to $351 billion, significantly above consensus. Price target raised from $200 to $320, reflecting bullish sentiment. Nvidia's financial health is robust, with impressive revenue growth and strong profitability metrics, but valuation metrics indicate a premium positioning in the market. Analyst sentiment remains positive, but sector-specific risks and insider selling caution investors.

HSBC analysts led by Frank Lee have upgraded Nvidia's (NASDAQ:NVDA) stock rating to Buy from Hold, reflecting their bullish outlook on the company's growth prospects in the AI graphics processing unit (GPU) market. The analysts increased Nvidia's price target to $320 from $200, citing significant upside potential in the AI GPU total addressable market (TAM) according to a Seeking Alpha report.

The upgrade is based on HSBC's increased fiscal 2027 estimate for GPU TAM, which led to an upward revision in their fiscal 2027 data center revenue estimate to $351 billion, a 36% increase above consensus forecasts of $258 billion, the report noted. The analysts also anticipate a potential easing of China GPU uncertainties following the US-China trade deal, which could enable Nvidia to see a demand recovery in the Chinese market.

Moreover, HSBC has raised Nvidia's fiscal 2027 estimate for Chip on Wafer on Substrate (CoWoS) allocation to 700K from 480K, indicating a year-over-year growth of 140%. This aggressive estimate for CoWoS wafer forecasts at Taiwan Semiconductor Manufacturing (TSM) is expected to drive upward revisions in fiscal 2027 data center revenues, exceeding consensus forecasts and affirming HSBC's thesis of ever-increasing AI GPU TAM beyond traditional cloud service providers (CSP) capital expenditure, the report added.

Nvidia's shares rose about 2% on Wednesday following the upgrade, reflecting investor optimism about the company's growth prospects. However, the stock remains at a premium valuation, with a price-to-earnings ratio (P/E) of 34.2x, compared to the industry average of 19.4x. Analyst sentiment remains positive, but investors should be cautious of sector-specific risks and insider selling, the Seeking Alpha piece noted.