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Citi maintains $150 target on NVIDIA shares, reiterates Buy rating

Published 07/10/2024, 19:24
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On Monday, Citi reaffirmed its Buy rating on NVIDIA Corporation (NASDAQ:NVDA) with a consistent price target of $150.00. The firm's outlook is based on a projection of strong year-over-year growth in cloud data center capital expenditures, anticipating over 40% increase next year. Despite this, NVIDIA's stock is expected to stay within a certain range until the Consumer Electronics Show (CES) in January, followed by a sales and gross margin upturn in April, driven by the company's new product, Blackwell.

The analyst from Citi highlighted that artificial intelligence (AI) adoption is still in the early to middle phases, with enterprise AI demand set to surge, propelled by AI agents. They forecast a temporary dip in gross margins to approximately 72% in the January quarter, with long-term margins stabilizing in the mid-70s percentage range once Blackwell is fully integrated.

The discussion also covered the choice between custom ASICs and GPUs, noting that GPUs are preferred due to their flexibility and adaptability to rapidly evolving AI applications. The analyst pointed out that GPUs, unlike ASICs, allow enterprises to write applications once and use them across multiple clouds, which aligns with the prevalent multi-cloud strategy.

NVIDIA's lead in total cost of ownership (TCO) and return on investment (ROI) was emphasized as a key factor for data center operators, who value the ability to run various applications, including AI, on NVIDIA's hardware. As the industry moves towards system-level scaling due to the slowing of Moore's Law, NVIDIA's evolution from chips to systems is seen as a strategic advantage.

Finally, Citi expects a shift in NVIDIA's sales mix towards the GB200 format, which offers better TCO and ROI. While the firm recognizes the need for patience as generative AI creates new business models, it anticipates positive ROI data points to emerge next year, particularly from GPU as a service providers.

In other recent news, Super Micro Computer (NASDAQ:SMCI) has reported shipping over 100,000 graphics processors (GPUs) each quarter due to the surge in demand for generative artificial intelligence technology. The company also announced the launch of a new suite of liquid cooling products. In addition, JPMorgan (NYSE:JPM) maintained a $155.00 price target on NVIDIA Corporation, expressing confidence in its next-generation Blackwell GPU platform. The firm anticipates substantial revenues from the Blackwell GPUs in its fiscal fourth quarter.

OpenAI, known for its ChatGPT, secured $6.6 billion in a recent funding round, reaching a post-money valuation of $157 billion. Major contributors included Microsoft (NASDAQ:MSFT) and Nvidia. However, Apple Inc (NASDAQ:AAPL). exited negotiations to invest in the same funding round.

Lastly, Foxconn (SS:601138), the largest contract electronics manufacturer globally, announced that executives from Nvidia, Google (NASDAQ:GOOGL), and BMW (ETR:BMWG) will be featured speakers at their annual tech day forum.

InvestingPro Insights

NVIDIA's strong market position, as highlighted in Citi's analysis, is further supported by recent InvestingPro data. The company's market capitalization stands at an impressive $3.18 trillion, reflecting its dominant role in the semiconductor industry. NVIDIA's financial performance has been exceptional, with a staggering revenue growth of 194.69% in the last twelve months as of Q2 2025, aligning with Citi's projections of continued strong growth in cloud data center expenditures.

InvestingPro Tips underscore NVIDIA's financial strength. The company boasts impressive gross profit margins, which supports Citi's forecast of long-term margins stabilizing in the mid-70s percentage range. Additionally, NVIDIA has maintained dividend payments for 13 consecutive years, demonstrating its commitment to shareholder returns despite its focus on growth and innovation.

The company's P/E ratio of 60.22 might seem high, but it's important to consider this in the context of NVIDIA's rapid growth and market leadership in AI technologies. An InvestingPro Tip notes that NVIDIA is trading at a low P/E ratio relative to its near-term earnings growth, suggesting potential undervaluation despite its recent stock price surge.

For investors seeking a deeper understanding of NVIDIA's potential, InvestingPro offers 21 additional tips, providing a comprehensive analysis of the company's financial health and market position.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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