Why Nvidia stock could be worth a third more than it is today
A recovery from the DeepSeek sell-off is just the beginning for this popular chip firm, according to one expert. City writer Graeme Evans finds out why.
19th February 2025 16:35
by Graeme Evans from interactive investor
Nvidia CEO Jensen Huang and Donald Trump. Picture credit: Patrick T. Fallon and Mandel NGAN/AFP via Getty Images.
A bullish preview of NVIDIA Corp (NASDAQ:NVDA) results today forecast another set of blockbuster figures as the chip giant’s shares continue their recovery following last month’s DeepSeek sell-off.
UBS’ accompanying price target of $185 compares with the $143 seen before the slump caused by the surprise emergence of China’s lower-cost threat to America’s AI dominance.
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The $3.4 trillion (£2.7 trillion)-valued tech giant today traded at just below $140 but had been as low as $116.50 at one point in early February as traders also worried that Donald Trump’s planned tariffs could disrupt the supply of Taiwan-made chips.
Despite the US president’s warning last night that April’s levies on vehicle, pharma and chip imports could be in the region of 25%, Wall Street and Nvidia opened in a resilient fashion today.
US market confidence has been boosted in recent weeks by a robust results season, with fourth-quarter earnings pointing to the strongest year-of-year growth since the end of 2021.
About 80% of the S&P 500 index by market value had reported by last week, with Nvidia the most notable exception.
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Its fourth-quarter figures are due after next Wednesday’s closing bell, a release that is the equivalent in value terms of every FTSE 350 company reporting at the same time.
Nvidia has a record of smashing guidance, although in August the figures were not quite as eye-popping as usual to leave the shares down as much as 8%.
Today’s note by UBS anticipates another strong set of results, including fourth-quarter revenues well ahead of Wall Street’s estimates at $42.1 billion. It is also positioned for current quarter guidance at $47 billion, considerably higher than the consensus.
The price target of $185 represents 30 times forecast 2026 earnings of $6.23 a share.
The focus of the results will be on shipments of Nvidia’s new Blackwell platform, which unlocks generative AI for the likes of Microsoft Corp (NASDAQ:MSFT), Meta Platforms Inc Class A (NASDAQ:META) and other firms building AI data centres.
Chief executive Jensen Huang told CNBC last year that demand had been “insane” before adding at a Las Vegas conference last month that Blackwell is in full production with systems up and running at every major cloud provider.
The architecture features six technologies for accelerated computing in data processing, engineering simulation, electronic design automation, computer-aided drug design, quantum computing and generative AI — all emerging industry opportunities for Nvidia.
UBS expects Blackwell revenue of about $9 billion for the most recent quarter before this figure more than doubles in the current quarter to over $20 billion. It sees a “very strong” ramp throughout 2025, resulting in total annual revenues of $234 billion.
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While a heavier Blackwell product mix in the fourth quarter could add pressure on the gross margin, the bank doesn’t see this metric going below 72% in the first quarter before a recovery through the rest of the 2025-26 financial year.
On DeepSeek, UBS said the advances represented an evolution of the significant progress that has already been made on both model efficiency and cost reductions.
It added: “We said in early 2023 that costs are coming down so fast that demand elasticity will carry the day - and we expect a full-throated message from the company along these lines.
“Even as costs have come down, the spigot of investment dollars flowing into AI infrastructure has only widened further - continued growth in hyperscaler budgets and recently announced AI mega-projects are testament to this - and we think Nvidia is positioned to remain the primary beneficiary of all this spend.”
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