Nvidia shares experienced a slight dip in early Thursday trading but managed to recover most of their post-earnings losses as Wall Street analysts rushed to update their ratings and price targets for the AI chipmaker following its highly anticipated Q2 earnings report.
Nvidia, a leader in the production of chips and processors that power AI systems worldwide, posted record revenue of $30.04 billion for its fiscal second quarter, with profits more than doubling from the same period last year, reaching 68 cents per share. The company also projected that revenue would continue to improve in the current quarter, although at a slower pace, forecasting a top-line tally of $32.5 billion. This is despite some delays in the shipment of its new line of Blackwell processors due to design changes and supply-chain challenges.
Nvidia announced that it made "a change to the Blackwell [graphics-processing-unit] mask to improve production yield." The Santa Clara, California-based company added that the production ramp is "scheduled to begin in the fourth quarter and continue into fiscal 2026."
During a conference call with investors, Nvidia CEO Jensen Huang expressed excitement about the demand for the new Blackwell GPUs, describing it as "incredible." He mentioned that there are around 100 different types of Blackwell-based systems currently being sampled by Nvidia’s ecosystem. Huang emphasized that the functionality of Blackwell is as expected, and the company anticipates shipping the units in Q4. He also noted that demand for Nvidia's legacy Hopper chips remains "really strong," reinforcing the idea that Blackwell's arrival is eagerly awaited in the market.
Nvidia's CFO, Colette Kress, added that the Blackwell line is expected to generate "several billion" in revenue during the fiscal fourth quarter, which ends in January. Kress also mentioned that sales of Hopper processors are expected to accelerate in the second half of the year. This is crucial information for investors who were concerned that the Blackwell launch might lead to cancellations or postponements of Hopper orders as customers wait for the newer, more powerful processors.
Despite the expected impact of the Blackwell launch on Nvidia's profit margins, which narrowed slightly to 75.7% in Q2 and are projected to stabilize around 75% in the near term, analysts remain optimistic about Nvidia's data center revenue opportunities across cloud, consumer internet, and enterprise customers.
Goldman Sachs analyst Toshiya Hari, for instance, reiterated his strong buy rating on Nvidia stock following the earnings update, setting a price target of $135 per share. Hari pointed out that despite the lower-than-expected gross margin guidance, Nvidia's opportunities in the data center market remain robust.
Nvidia's strong performance and future outlook highlight its continued dominance in the AI chip market, driven by the rapid adoption of AI technologies across various industries. The company’s ability to generate significant revenue even amidst production and supply-chain challenges underscores its resilience and strong market position. As Nvidia enters the fourth quarter with its new Blackwell line, the company is poised to continue leading the AI revolution, delivering advanced solutions that cater to the growing demand for AI-powered systems.
In conclusion, while the launch of Blackwell may put some pressure on Nvidia's profit margins, the overall outlook for the company remains positive, with strong demand for both its current and upcoming products. As Wall Street analysts update their projections, Nvidia's stock remains a compelling opportunity for investors looking to capitalize on the ongoing AI boom. The company’s strategic focus on innovation and market leadership ensures that it will remain at the forefront of the industry, driving growth and profitability in the years to come.