In a rare event, Nvidia (NASDAQ: NVDA) shares experienced a sharp decline of nearly 7% during Wednesday’s trading session. This drop was primarily driven by concerns over potential additional regulatory measures from the White House against China’s chipmaking industry. Furthermore, Donald Trump’s statement suggesting that Taiwan should pay the U.S. for protection added to the uncertainty, affecting relations with the world’s largest chip exporter.
Despite this sudden decline, Goldman Sachs’ Toshiya Hari, a highly rated 5-star analyst, remains optimistic about Nvidia’s future. After a group meeting with Nvidia’s Chief Financial Officer, Colette Kress, Hari reaffirmed his positive outlook on the company’s market position and growth prospects. He emphasized the sustainability of the ongoing Generative AI (Gen AI) spending cycle and Nvidia’s ability to maintain its leadership through continuous innovation in Compute, Networking, and Software.
A key highlight from the meeting was the upcoming launch of the Blackwell GPU platform. Kress indicated that key suppliers are better prepared for this transition compared to previous generational changes. While the Blackwell products are expected to generate limited revenue in the fiscal third quarter (October), significant growth is anticipated in the fiscal fourth quarter (January) and the fiscal first quarter (April), primarily driven by the GB200 NVL36 and NVL72 configurations.
Given the substantial increase in hyperscale capital expenditure (capex) over the past year and a half, and the strong near-term outlook, there is ongoing investor concern about the longevity of the current capex trend. Although Hari acknowledges the early stage of Gen AI and the uncertainty regarding its adoption rate, he draws reassurance from a recent analysis by his colleagues. This analysis compares the current Gen AI cycle to previous Compute build cycles, noting that Microsoft’s current capex efficiency mirrors that of years 4-5 in the Cloud Computing cycle. Additionally, Azure AI revenue after five quarters is surpassing the trajectory Azure had six years post-launch.
Hari maintains a Buy rating for Nvidia shares, with a price target of $135, suggesting a potential 15% upside over the next year. The Street’s average price target is slightly higher at $140.85, indicating a projected gain of 19% over the 12-month period. Overall, with 37 Buys and 4 Holds, NVDA stock holds a Strong Buy consensus rating.
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In summary, while Nvidia’s shares faced a significant dip due to geopolitical concerns and potential regulatory measures, the company’s strong market position, ongoing innovation, and promising future prospects, as highlighted by Goldman Sachs’ analysis, suggest a resilient outlook for the tech giant.