Wedbush and Goldman Sachs both bullish on NVIDIA: AI spending wave still in early stages, Q2 performance expected to be outstanding
Wedbush Securities is optimistic about NVIDIA's performance in the wave of artificial intelligence spending, predicting a strong Q2 performance. Matt Bryson, Senior Vice President of Wedbush, pointed out that although market concerns about the demand for AI chips have led to recent selling of NVIDIA stocks, the company's major customers such as Foxconn and AMD still report good profit growth, indicating that AI investments have not decreased. NVIDIA's Blackwell chip release progress is seen as part of a long-term plan and is not expected to impact overall performance
According to the Zhitong Finance APP, Wedbush Securities stated that with the full deployment of the artificial intelligence spending boom, NVIDIA (NVDA.US) will inevitably bring another strong quarterly performance.
The investment firm referred to NVIDIA's founder Jensen Huang as the "godfather of artificial intelligence" and expressed optimism about this chip manufacturer before the release of the second-quarter financial report on August 28. Matt Bryson, Senior Vice President of Stock Research at Wedbush, stated that the previously predicted $1 trillion artificial intelligence spending "wave" is underway, with tech companies still in the early stages of investing in artificial intelligence hardware.
Bryson said in an interview on Monday, "Driving this trend is NVIDIA's continued significant spending on artificial intelligence chips." He pointed out that the recent sell-off of NVIDIA's stock stemmed from concerns about declining demand for the company's artificial intelligence chips and potential issues with its next-generation GPU, Blackwell.
However, some of NVIDIA's largest customers reported healthy profits, partly due to increased investment in artificial intelligence. As a major buyer of NVIDIA chips, Foxconn's profit grew by 6% in the last quarter, mainly attributed to the "strong growth momentum" brought by its artificial intelligence servers. Bryson noted that another major customer of NVIDIA, Super Micro Computer (SMCI.US), had "very good" sales in the last quarter, although profits did not exceed expectations, revenue exceeded expectations.
He added, "The recovery is related to many recent data points, indicating that spending on artificial intelligence has not slowed down."
Bryson predicted that integrating artificial intelligence into personal devices could also become a major driver for the semiconductor industry, as it will drive more demand for artificial intelligence content.
He added that the delay in releasing the Blackwell chip by NVIDIA may also be "irrelevant" in this grand plan, provided that the company is expected to start rolling out this chip as planned from now on.
Bryson said, "With the launch of Blackwell, everyone is committed to spending on artificial intelligence. So, the wave of artificial intelligence spending has been extended for another year. I still give NVIDIA a 'buy' rating, and I believe NVIDIA's stock price will rise again next quarter. They have been doing this all along. Their customer base seems unchanged."
Similarly, Goldman Sachs analyst Toshiya Hari reiterated his "conviction buy" rating on NVIDIA and a target price of $135, stating that NVIDIA's demand situation remains convincing.
Hari and his team wrote, "While the delay of NVIDIA's Blackwell may cause some short-term fluctuations in fundamentals, we expect management comments, coupled with supply chain data points in the coming weeks, to increase confidence in NVIDIA's earnings potential for 2025."
Hari added, "Importantly, we believe that the strong demand from large cloud service providers and enterprise customers, coupled with NVIDIA's strong competitive position in the field of artificial intelligence/accelerated computing, remains intact." NVIDIA stated in May that its revenue for the current quarter is expected to increase to around $28 billion, which is better than expected. This data alleviated investors' concerns about the so-called "air pocket" brought by Blackwell's release. Some investors were worried that customers would cancel orders for the old H100 chips and wait for the new system processors to be launched later this year.
Analysts expect NVIDIA's adjusted earnings per share to be 64 cents in the three months ending in July, with revenue increasing by nearly 90% compared to the same period last year, reaching $25.6 billion.
However, some analysts believe that the demand for NVIDIA chips is bound to decrease. According to an analyst who predicts a long-term decline in NVIDIA's stock, some of NVIDIA's biggest customers, such as Meta, Google, and Amazon, have been developing their own chips or investing in other partners