Nvidia Sees Surprising Stock Upgrade After Wall Street Reboot

Earlier on Thursday, we boosted our price target on Nvidia NVDA shares to $175 from $160 following robust April quarter results and guidance that underscored the continued strength in AI and data center demand, but also better margins ahead.

We were not alone in making such an adjustment, many others across Wall Street also lifted their targets and some, like Truist and Rosenblatt Securities, took a more aggressive stance with their new targets of $210 and $200, respectively. What did surprise us was the upgrade to Buy from Hold at Summit Insights, largely because the firm missed the 24% quarter-to-date move into Wednesday night’s earnings report.

We’ll continue to follow the data and signals, including upcoming monthly revenue reports from Taiwan Semi TSM and Foxconn as well as AI and data center capex comments in the upcoming Q2 2025 earnings season. Part of that data and signals will be the continued adoption of AI across the enterprise as well as in consumer electronic devices. We expect quarterly results from Elastic ESTC after Thursday's market close will speak to the former, building on comments from Salesforce CRM on Wednesday night about the adoption of Agentforce that has passed 800 production customers.

Also after today’s market close, we suspect Dell DELL will deliver AP PC comments in line with those from HP HPQ as well as bring another dimension of confirmation for AI and data center server demand. Putting those comments together, our thesis for Marvell MRVL remains unchanged as the company benefits from AI and data center demand, ramping third-party AI chip solutions, and rising capex demands to address AI-induced network and carrier infrastructure bottlenecks.

Nvidia’s April Quarter and Guidance

For its April quarter, Nvidia delivered EPS of $0.81, well ahead of the $0.73 market consensus, on revenue of $44.06 billion, up a staggering 69% year over year, and nicely ahead of the $43.34 market forecast.

In our preview note on Wednesday, we called out how Nvidia’s Data Center segment would be the primary driver of its results because it accounted for about 90% of revenue in the last two quarters. For the April quarter, that figure dipped ever so slightly to 89%, but make no mistake: the 73% year-over-year revenue jump for that segment drove Nvidia’s overall results. The Gaming and AI PC segment rose 42% year over year to $3.8 billion; Professional Visualization, Automotive and Robotics were up strong year over year but their combined revenue of $1.1 billion really doesn’t move the Nvidia needle.

Excluding the $4.5 billion charge tied to H20 product into China, Nvidia’s gross margin dipped to 71.3% in the April quarter, down from 73.5% in the prior quarter and 78.9% the one before that. The continued decline was telegraphed earlier this year by Nvidia and reflected the continued transition to Blackwell from Hopper. During the quarter, Blackwell contributed nearly 70% of Data Center compute revenue. As that ramp continues and Blackwell matures as a product, Nvidia reiterated expectations for its gross margins to rebound to mid-70% in the next few quarters.

As we expected he would, CEO Jensen Huang recapped key developments from the quarter, touching on partnerships with Accenture ACN, Microsoft MSFT, Deloitte, Yum! Brands YUM, Cisco CSCO, Shell SHEL, Check Point CHKP, CrowdStrike CRWD and Palo Alto PANW. He also shared that we should even after the AI and data center announcements from the last few weeks, we should be prepared for further announcements in the coming months. Jensen also shared a comment that keeps us bullish on our shares of ServiceNow NOW and Palantir PLTR as well as other holdings – “enterprise AI is ready to take off.”

Turning to Nvidia’s guidance, it sees July quarter revenue between $44.10 billion and $45.90 billion, up 50% year over year at the midpoint, which reflects continued sequential growth across all of its platforms. In the all-important Data Center business, the continued ramp of Blackwell will be partially offset by a decline in the businesses’ China revenue as the H20 ban delivers a loss of about $8 billion for the quarter. Management shared it is still evaluating options to supply data center compute products compliant with the U.S. government's revised export control rules. From a market opportunity perspective, losing access to the China AI accelerator market, which Nvidia believes will grow to nearly $50 billion would be a lost opportunity.

We expect to get more color on Nvidia’s business when management presents at the BofA Global Technology Conference on June 4, the Rosenblatt Virtual AI Summit and NASDAQ Investor Conference on June 10, and GTC Paris at VivaTech on June 11.

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At the time of publication, TheStreet Pro Portfolio was long NVDA, ESTC, MRVL, MSFT, NOW and PLTR.