Nvidia Stock: UBS Expects ‘Strong Results' When the Company Reports Q4 Earnings

Globe and Mail

24-02-2025

Investors in chip major Nvidia (NVDA) are starting to breath again as hype over Chinese startup DeepSeek and its lower-cost AI model dies down. After seeing its market cap erode by a massive $589 billion in a single day on DeepSeek-driven panic, Nvidia shares have started to recover. And encouragingly for Nvidia shareholders, UBS believes the company will report Street-beating numbers for its fiscal fourth quarter on Feb. 26.
UBS Is Bullish on Nvidia
Reiterating its 'Buy' rating on the Jensen Huang-led firm, UBS analyst Timothy Arcuri commented, 'We expect a strong set of results with guidance that is in-line to better than FQ1 (April) investor bogeys of ~$42.5-43B for total revenue and ~ $38.5B-39B for data center. … With the big inflection in Blackwell compute board production in 2H of NVDA's FQ4 (Jan), we also believe many customers have pivoted to Blackwell SKUs that are more immediately available (e.g. B200 on the air-cooled HGX platform) and have avoided waiting for the GB200 rack power issues to be fully resolved, as customers are clamoring to get Blackwell installed even a month or two earlier.'
Arcuri's optimism about Nvidia is built on solid ground with the stock still up a sizeable 70% over the past year.
Nvidia Is a Consistent Outperformer
Nvidia has cemented itself as a dominant force in the semiconductor industry, boasting an astonishing market capitalization of $3.3 trillion. Over the past decade, the company has delivered exceptional financial performance, with its revenue and earnings growing at compound annual growth rates of 37.84% and 59.72%, respectively.
The latest quarterly results further underscore Nvidia's momentum. In the third quarter of its fiscal 2025, the company reported $35.1 billion in revenue, exceeding Wall Street's forecast of $33.2 billion. Earnings per share came in at $0.81, surpassing analysts' expectations of $0.75. This marks the eighth consecutive quarter in which Nvidia has outperformed earnings projections, reinforcing its status as a market leader.
Beyond revenue and profitability, the company's cash flow and balance sheet highlight its financial health. Operating cash flow surged to $17.6 billion, more than doubling from $7.3 billion in the same period a year earlier. With a robust cash reserve and no short-term debt, Nvidia remains well-positioned to sustain its growth trajectory.
Consequently, analysts project the company will maintain its rapid expansion, with revenue and earnings expected to surge by 93.64% and 189.37%, respectively — growth rates that significantly outpace the broader industry averages of 6.38% and 11.19%.
Key Catalysts
Nvidia's financial strength gives it the firepower to continue its dominance in AI, which is reflected by its 90% market share in the chip sector. This dominance is further reinforced by the introduction of its Blackwell GPU architecture, a major leap forward in artificial intelligence and high-performance computing. Designed for peak efficiency, Blackwell delivers up to 2.5 times faster AI training and an astonishing 15 times higher inference speeds compared to its predecessor, Hopper.
The escalating competition among tech giants like Amazon (AMZN), Microsoft (MSFT), Meta (META), and Google (GOOGL) in the AI and cloud computing sectors also bodes well for Nvidia. According to pymnts.com, these companies are projected to allocate a staggering $320 billion toward AI investments in 2025. With such substantial capital flowing into data centers, the demand for Nvidia's GPUs is poised to surge even further, reinforcing its integral role in powering next-generation AI infrastructure.
Adding to this momentum, President Donald Trump's Stargate initiative represents an unprecedented shift in private sector investment in AI hardware. Backed by OpenAI, SoftBank (SFTBY), and Oracle (ORCL), Stargate comes with $500 billion in funding over the next four years. The initial $100 billion funding directed toward Texas-based data centers will significantly boost demand for Nvidia's chips.
Beyond AI processors, Nvidia's near-monopoly in GPU-powered cloud computing is another pillar of its dominance. Approximately 93% of GPU-based cloud instances rely on Nvidia's hardware, thanks to deep integration with leading cloud providers such as Microsoft Azure and Google Cloud. The company's Hopper and Blackwell architectures are specifically designed to scale AI capabilities in the cloud, further solidifying its unassailable market position.
The total addressable market for Nvidia remains vast, encompassing opportunities in cloud infrastructure, AI accelerators, Edge AI, data analytics, and data center modernization. Crucially, these sectors are deeply interconnected, where Nvidia's full-stack approach creates powerful network effects and significant switching costs through its CUDA ecosystem and enterprise AI solutions, reinforcing its grip on the future of AI computing.
Analyst Opinion on NVDA Stock
Overall, analysts have attributed a rating of 'Strong Buy' for the stock with a mean target price of $176.95. This denotes upside potential of about 30% from current levels. Out of 43 analysts covering the stock, 37 have a 'Strong Buy' rating, two have a 'Moderate Buy' rating, and four have a 'Hold' rating.