‘Don't Count Nvidia Out Yet,' Says Raymond James on This AI Stock
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The analyst outlines key points to watch for in the quarter and explains why he remains optimistic about Nvidia's long-term growth.
Revenue Momentum to Continue, Though Near-Term Risk Looms
Pajjuri points out that NVDA has added about $4–5 billion in revenue sequentially each quarter for the past six quarters. He expects this growth trend to mostly continue in Q2 FY26, driven by strong demand for Blackwell.
However, the analyst warns that the H20 export restriction could reduce revenue by about $4 billion in Q1, especially in China, leading to limited upside for this quarter.
Second-Half Outlook Remains Bright
Despite this short-term challenge, Pajjuri thinks NVIDIA's management will stay positive about the second half of the year. He points to sustained investment from top cloud providers like Amazon (AMZN), Microsoft (MSFT), and Google (GOOGL), which he believes will drive continued strength in AI infrastructure spending.
In addition, Pajjuri points to recent changes in U.S. AI diffusion rule policies, which could ease export limits and partially offset the China-related slowdown.
Middle East Adds Fuel to Growth Story
Looking further ahead, Pajjuri highlights the Middle East as an 'emerging driver' for NVIDIA's long-term growth. Just last week, the company announced a partnership with Humain, an AI firm backed by Saudi Arabia's Public Investment Fund. Together, they plan to build AI data centers, called 'AI factories,' in Saudi Arabia. These facilities will be powered by up to 500 megawatts and will use hundreds of thousands of NVIDIA's top GPUs over the next five years.
The analyst believes that growing AI demand in the region could keep Blackwell momentum going through 2026, helping to ease worries that global AI spending is slowing down.
Margin Guidance Likely to Hold Steady
Finally, the analyst expects Nvidia to maintain its profitability targets. He anticipates that management will reiterate its prior guidance for gross margins in the mid-70% range by the end of calendar year 2025. This, he contends, reflects the company's strong pricing power and continued operational efficiency.
Is Nvidia Stock a Buy, Sell, or Hold?
With 34 Buys, five Holds, and one Sell recommendation, Nvidia stock scores a Strong Buy consensus rating. The average NVDA stock price target of $164.51 implies about 21.35% upside potential.
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