Goldman Sachs Remains Bullish on Nvidia Despite Recent Volatility
Nvidia, the leading AI chipmaker, has been on a tear this year, with its stock price soaring by 153% year-to-date. However, the company’s recent performance has been met with some skepticism, causing its share price to decline by 11% since its all-time high in mid-June. Despite this, Goldman Sachs remains optimistic about Nvidia’s future prospects, reiterating its buy rating and $135 price target for the stock.
Key Takeaways:
- Goldman Sachs predicts Nvidia will exceed revenue and earnings expectations for the second quarter, driven by strong data center performance.
- Despite potential delays in the shipment of the Blackwell chip, Goldman believes this will have a minimal impact on Nvidia’s earnings power in 2025.
- The analyst sees continued robust demand for AI infrastructure, positioning Nvidia favorably within the evolving data center market.
- Goldman forecasts continued growth in Nvidia’s data center revenue, predicting double-digit growth through 2026.
Nvidia’s Robust Performance and Uncertain Future
While Nvidia’s stock price has experienced a recent pullback, it’s important to remember the significant growth the company has achieved this year. This growth has been driven by the surging demand for AI infrastructure, fueled by the rapid advancements and adoption of artificial intelligence across various industries. Nvidia, with its powerful GPU chips, is at the heart of this AI revolution, providing the processing power needed for training and running AI models.
Analysts are keen to see how Nvidia’s second-quarter earnings will reflect this growing demand. The upcoming earnings announcement on August 28 will be crucial for understanding whether Nvidia can maintain its momentum, especially amidst a broader market volatility and concerns about the sustainability of the AI boom.
Goldman Sachs’ Rationale for Confidence in Nvidia
Despite the recent market uncertainty, Goldman Sachs remains confident in Nvidia’s future prospects. The investment bank expects the company to outperform market expectations in its second-quarter earnings, citing the strong growth in the data center segment as a key driver.
Analyst Toshiya Hari highlighted the "upside to Data Center revenues and strong operating leverage" that will likely contribute to Nvidia’s successful performance. He emphasized the robust demand for AI/accelerated computing across industries, pointing to the company’s "strong competitive position" in the market.
Potential Headwinds and Opportunities
While Goldman’s bullish stance is strong, the company does acknowledge potential headwinds, particularly the potential delay in the shipment of Nvidia’s Blackwell chip. These delays could potentially impact the company’s earnings power in 2025, but Hari believes the impact will be minimal.
However, he also pointed to the "constructive set-up" for Nvidia’s stock, noting its "relative premium of only 46% (vs. its past 3-year median of 151%)". This suggests the stock’s valuation is still attractive despite its recent gains, indicating significant future potential for growth.
Data Center Growth: A Major Driver for Nvidia
The data center segment remains critical for Nvidia’s growth trajectory, as companies across industries are investing heavily in AI infrastructure to leverage the capabilities of these technologies. Goldman Sachs expects this trend to continue, with data center revenue climbing by double digits through 2026.
These projections demonstrate the massive opportunity presented by the expanding AI market, where Nvidia is well-positioned to leverage its technological expertise and capitalize on the growing demand for AI-powered solutions.
Looking Ahead: What to Watch For
As Nvidia prepares for its second-quarter earnings report, investors will be closely watching several key factors:
- Data Center Revenue Growth: Given Goldman Sachs’s projections, exceeding expectations in this segment will be crucial for Nvidia to demonstrate its continued momentum.
- Customer Demand for AI Infrastructure: The robustness of demand from cloud service providers and enterprises will be a key indicator of Nvidia’s market standing.
- Impact of Potential Blackwell Chip Delays: Investors will be interested to hear how Nvidia is managing potential delays in the Blackwell chip’s rollout and their impact on future earnings.
- Competitive Landscape: As the AI market rapidly evolves, investors will be watching for any signs of increased competition and how Nvidia is navigating these challenges.
The upcoming earnings announcement will provide crucial insights into Nvidia’s performance and future prospects. With Goldman Sachs’s strong confidence in the company’s growth potential, it remains to be seen whether Nvidia can weather the recent market volatility and continue its impressive run in the rapidly expanding AI market.
