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Goldman Sachs lifts NVIDIA stock target on Data Center growth

EditorAhmed Abdulazez Abdulkadir
Published 2024-08-29, 06:44 a/m
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On Thursday, Goldman Sachs (NYSE:GS) maintained its Conviction Buy rating on NVIDIA Corporation (NASDAQ:NVDA) and increased the price target to $135.00. The firm's analyst cited the company's Data Center revenue potential as a key driver for the optimistic stance. NVIDIA's broad customer base, spanning Cloud, Consumer Internet, and Enterprise segments, along with its Training and Inference workloads, were highlighted as significant growth areas.

The analyst noted that despite expectations for NVIDIA's gross margin outlook to be in the low-70% range for the fiscal fourth quarter ending in January, coupled with an increasing operating expense budget, the prospects for the Data Center segment remain strong. The management's confirmation of a successful redesign of Blackwell, the next-generation Compute platform, was also mentioned.

This redesign reportedly achieves the same performance levels without any compromises and is expected to add several billion dollars in revenue in the fiscal fourth quarter, further bolstering an already growing Hopper revenue stream.

In response to these developments, Goldman Sachs has adjusted its financial model for NVIDIA. The firm has decreased its non-GAAP gross margin forecasts for fiscal years 2026 and 2027 by 200 basis points (bps) and 210 bps, respectively.

However, it modestly increased its non-GAAP earnings per share (EPS) estimates, excluding stock-based compensation (SBC), by 3% for fiscal year 2026 and 1% for fiscal year 2027. This adjustment is primarily due to the anticipated higher Data Center revenue.

The revised price target of $135.00 reflects the firm's confidence in NVIDIA's revenue opportunities and its ability to maintain a strong performance in the Data Center market. Goldman Sachs' Conviction Buy rating indicates a strong endorsement of NVIDIA's stock, suggesting that the firm believes NVIDIA will outperform the market.

In other recent news, NVIDIA Corporation has been the subject of several analyst reports following its latest earnings release. UBS maintained a Buy rating on NVIDIA with a $150 price target, highlighting a significant rise in NVIDIA's purchase commitments and supply obligations, a key indicator of potential future growth.

Cantor Fitzgerald also reaffirmed its positive stance on NVIDIA, maintaining an Overweight rating and a $175 price target, noting NVIDIA's solid performance despite the delay of the Blackwell product.

Jefferies maintained a Buy rating and a $150 price target, emphasizing strong demand for NVIDIA's Hopper products. KeyBanc reaffirmed an Overweight rating and a $180 price target, citing NVIDIA's leadership in the General AI sector and its ability to navigate the Blackwell GPU delay.

Barclays (LON:BARC) reiterated an Overweight rating with a $145 target, highlighting key developments that suggest a positive trajectory for NVIDIA, despite the company's guidance not meeting market expectations.

These recent developments come after NVIDIA reported robust demand for its Hopper products and confirmed that the delay of the Blackwell product is no longer a concern, with revenue projections in the billions expected to start in the fourth quarter.

These developments follow the company's recent financial performance, which analysts have deemed promising, despite some falling short of investor expectations. The Blackwell GPU delay was factored into market expectations and adjustments have been made to enhance production yields.

InvestingPro Insights

Goldman Sachs' Conviction Buy rating on NVIDIA is bolstered by several key metrics and insights from InvestingPro. NVIDIA's perfect Piotroski Score of 9 reflects strong financial health and profitability, aligning with Goldman Sachs' positive outlook on the company's revenue potential. Analysts anticipate sales growth in the current year, which is crucial considering NVIDIA's high earnings multiple with a P/E ratio of 72.84. The company's significant role in the Semiconductors & Semiconductor Equipment industry and its capacity to maintain dividend payments for 13 consecutive years underscore its stability and appeal to investors.

InvestingPro data shows NVIDIA's impressive revenue growth over the last twelve months as of Q1 2023, at 208.27%, with a gross profit margin of 75.29%, highlighting the company's efficiency and market strength. These figures are particularly relevant given Goldman Sachs' focus on NVIDIA's Data Center revenue and the potential of the Blackwell platform to contribute significantly to the company's financial performance. Additionally, NVIDIA's liquid assets exceed short-term obligations, providing financial flexibility and resilience.

For investors seeking more in-depth analysis, InvestingPro offers additional insights, including a total of 20 InvestingPro Tips for NVIDIA, which can be accessed at https://www.investing.com/pro/NVDA. These tips provide a comprehensive understanding of NVIDIA's market position, valuation, and growth prospects, complementing the perspectives provided by Goldman Sachs and aiding investors in making informed decisions.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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