①After NVIDIA announced strong fourth-quarter earnings, its stock price plummeted in the U.S. market, humorously referred to as the 'NVIDIA curse'; ②Despite the sharp decline in stock price, investment banks such as Bank of America and Citi remain optimistic about NVIDIA’s future, raising their target prices one after another.
After the market close on Wednesday Eastern Time, $NVIDIA (NVDA.US)$ NVIDIA reported strong fourth-quarter earnings. Despite the impressive results, its stock price suffered a significant blow in the U.S. equity market: NVIDIA shares plummeted approximately 5.5% and 4.2% on Thursday and Friday, respectively.
No matter how strong the earnings report is, the sharp drop in NVIDIA's stock price after the release of financial results seems to have become a norm, a phenomenon humorously called the 'NVIDIA curse.' A few months ago, NVIDIA CEO Jensen Huang jokingly commented on this phenomenon during an all-staff meeting after the release of the third-quarter earnings report.
‘If our Q3 performance is poor, it proves there is an artificial intelligence bubble; if our Q3 performance is excellent, it means we are fueling the artificial intelligence bubble.’
However, despite the plunge in stock price, many investment banks on Wall Street remain confident about NVIDIA’s prospects. Following NVIDIA's earnings release, analysts from institutions such as Bank of America, Citi, and Truist Financial successively raised their target prices for NVIDIA and reiterated their positive outlook on the company.
Bank of America: NVIDIA Will Become the Most Reliable AI Supplier
Following NVIDIA’s earnings release, Bank of America analyst Vivek Arya and his team raised their non-GAAP EPS forecasts for NVIDIA’s fiscal years 2027/2028/2029 by 5%/10%/13%, to $8.11/$10.72/$13.18 respectively. They reiterated their buy rating on NVIDIA stock and increased the target price from $275 to $300.
The team stated that NVIDIA’s earnings performance ‘exceeded expectations,’ and they forecasted that revenue growth for the first fiscal quarter would accelerate to 77% year-over-year, higher than 73%, 63%, and 56% in the past three quarters.
Bank of America specifically highlighted NVIDIA’s ‘purchase obligations’ (contracts to purchase goods within a specified timeframe). In the latest earnings report, NVIDIA’s ‘purchase obligations’ surged from $16 billion a year ago to $95 billion.
Notably, on Thursday Eastern Time, renowned ‘Big Short’ investor Michael Burry emphasized this figure, suggesting that it could potentially pose a risk to NVIDIA’s future prospects.
Michael Burry pointed out that the reason for this surge lies in its key supplier, Taiwan Semiconductor, requiring NVIDIA to pay more cash for the complex custom chips it produces for NVIDIA. In the view of 'The Big Short' Burry, this means that NVIDIA has been "forced to place non-cancellable purchase orders before demand becomes clear." If downstream demand falters in the future, this figure, which is set to further expand, could pose a significant risk to NVIDIA's financial health.
However, analysts at Bank of America hold a completely opposite perspective on the surge in this figure.
Analysts at Bank of America believe that NVIDIA’s procurement obligations to upstream suppliers have increased more than threefold year-over-year, reaching $95 billion. This ensures the stability of the company's upstream supply chain, making it "highly likely to become the most reliable supplier in the AI market. We believe that the AI market could double in size over the next few years, reaching $1.4 trillion."
Citi: The GTC Conference in March May Stimulate Stock Price Growth
Citi released a research report maintaining a 'Buy' rating for NVIDIA and raised its target price from $270 to $300.
They expect NVIDIA’s revenue in the first fiscal quarter to exceed expectations, reaching $50 billion, primarily driven by exponential growth in proxy-based artificial intelligence demand.
Citi specifically mentioned that the upcoming GTC conference in mid-March will have a positive impact on NVIDIA's stock price. It is anticipated that NVIDIA will showcase Groq SRAM low-latency inference, CPU, and optical networking technologies during the event. Additionally, if NVIDIA provides early disclosure of sales outlook hints for the 2027 fiscal year, it could serve as a catalyst for further stock price increases.
The bank raised its revenue forecasts for NVIDIA’s 2027 and 2028 fiscal years by 4%, reflecting better-than-expected demand prospects for Blackwell and Rubin.
Citi also issued its first forecast for NVIDIA’s 2029 fiscal year, predicting that NVIDIA’s annual revenue will reach $566 billion by then, with an estimated compound annual growth rate (CAGR) of 35% from 2025 to 2028.
Additionally, Citi raised its earnings per share estimates for NVIDIA’s 2027 and 2028 fiscal years by 2%, to $8.02 and $10.20, respectively.
In a research report released on Thursday, investment analysts at Truist Financial raised their target price for NVIDIA from $275 to $283 and maintained a 'Buy' rating for the company.
Editor/Doris