Robust Earnings with a Mixed Market Response
Nvidia, the tech giant at the forefront of AI-driven semiconductor advancements, posted strong earnings, yet investor reactions remained mixed. With a market capitalization of $3.2 trillion, Nvidia reports showed stock volatility in pre-market trading on Thursday. Initially experiencing losses, the stock later rebounded by nearly 3%.
In its latest earnings announcement on Wednesday evening, Nvidia projected first-quarter gross profit margins in the range of 70.6% to 71%, largely due to the production ramp-up of its new Blackwell chip. The company’s top executives addressed concerns regarding potential pricing pressures and growing competition, particularly from AMD. Benchmark Company analyst Cody Acree expressed concerns over margin contraction, highlighting customer investments in proprietary ASICs and increased pricing sensitivity as contributing factors.
Despite concerns over margins, Nvidia CEO Jensen Huang remained optimistic, citing high demand for the Blackwell system and teasing new product announcements slated for the company’s GTC conference on March 17. CFO Colette Kress further reassured investors, stating that once the Blackwell rollout is complete, cost efficiencies should improve, potentially driving margins back to the mid-70% range by the end of the year.
AI Growth Powers Strong Revenue Gains
While analysts fixated on Nvidia’s margin outlook, the company reported an otherwise impressive financial performance. Nvidia reports showed quarterly revenue surged 12% sequentially and soared 78% year-over-year, driven by robust AI investments. The data center segment emerged as a key growth driver, more than doubling revenue from the previous year. Nvidia also exceeded analyst expectations for earnings, underscoring its continued dominance in the AI semiconductor space.
Wall Street analysts had varied reactions to Nvidia’s outlook. Citi analyst Atif Malik reaffirmed a ‘Buy’ rating with a price target of $163, citing Blackwell’s strong sales performance of $11 billion—exceeding Citi’s initial forecast of $10 billion. He pointed to accelerating demand for inference-based AI models, although he acknowledged concerns surrounding potential semiconductor tariffs and China-related regulatory risks. Similarly, HSBC analyst Ryan Mellor reiterated a ‘Buy’ rating and raised his Blackwell revenue forecast to $20 billion, though he noted that the company’s $43 billion first-quarter revenue target fell short of surprising the market.
Analysts Weigh Nvidia’s Competitive Edge and Risks
D.A. Davidson analyst Gil Luria maintained a ‘Neutral’ stance with a $135 price target, cautioning that AI infrastructure spending could eventually plateau as customers reassess their returns on investment. Meanwhile, Stifel’s Ruben Roy viewed the results favorably, emphasizing the resilience of the data center business and the potential for Blackwell-driven revenue acceleration in the latter half of the year. He also addressed concerns about Nvidia’s networking segment, attributing recent declines to transitional factors.
Keybanc analyst John Vinh reaffirmed an ‘Overweight’ rating with a $190 target, underscoring Nvidia’s strategic advantage in AI and machine learning workloads. He pointed to the company’s CUDA software ecosystem as a formidable barrier to competition. JP Morgan analyst Harlan Sur echoed similar sentiments, highlighting Nvidia’s ability to stay ahead of rivals through rapid product innovation and ecosystem expansion.
As Nvidia continues to push the boundaries of AI computing, Nvidia reports show that Wall Street remains divided on whether its astronomical growth trajectory can be sustained amid evolving market dynamics.
