To The Moon

Can NVIDIA's (NVDA.US) earnings report deflate the 'AI bubble theory'? Citi gives a 'Buy' rating, stating that AI demand far exceeds supply.

Citi released a research report maintaining a 'Buy' rating for NVIDIA (NVDA.US) and raised the target price from $210 to $220.

According to Zhitong Finance APP, Citi issued a research report stating that it maintains a "Buy" rating for NVIDIA (NVDA.US) and raised its target price from $210 to $220. Additionally, Citi initiated a "30-day short-term bullish" view on the stock, betting that its upcoming earnings report, to be released on November 19, will achieve a strong performance of "revenue beating expectations and guidance being raised."

Analysts Atif Malik and Papa Sylla noted in the report that despite concerns about the source of AI investment funds, a more fundamental fact is that due to constrained advanced packaging (CoWoS) capacity, the supply of AI chips will remain below demand until at least 2026.

Citi expects NVIDIA's upcoming earnings report to easily surpass Wall Street’s consensus estimates. The report forecasts that the company’s sales for the quarter ended October will reach $57 billion, exceeding the market’s average estimate of approximately $55 billion.

Regarding future outlook, Citi anticipates that NVIDIA’s sales guidance for the January quarter will reach $62 billion, again surpassing the market expectation of around $61 billion.

The report pointed out that behind this optimistic forecast is the robust shipment momentum of NVIDIA’s Blackwell architecture GPUs. Citi analysts believe that the information disclosed at NVIDIA’s GTC Washington event—indicating shipments of 6 million GPUs—is a strong signal that its October and January quarterly results may exceed expectations.

Citi stated in the report that its model assumes NVIDIA’s data center sales will grow sequentially by 24% and 12% for the October and January quarters, respectively, compared to market expectations of 19% and 15%, respectively.

In response to the increasingly intense market discourse about an "AI bubble," Citi presented a contrasting viewpoint. The bank's core argument is that the primary contradiction in the current AI chip market lies in undersupply rather than insufficient demand.

The bank stated, "Despite concerns surrounding debt and revolving financing portfolios tied to an AI capital expenditure bubble, we fundamentally see that AI supply, constrained by CoWoS capacity limitations, will remain below demand until at least 2026 and may only catch up at some point in 2027.

expectations for NVIDIA's (NVDA.US) upcoming earnings report and its implications for AI stocks:

1. Financial Performance Expectations

Revenue: Consensus estimates project Q3 FY2026 revenue of $54.9–55.4 billion (up ~56–60% YoY), driven by strong demand for AI chips. Data center revenue is expected to reach $49.1 billion.

EPS: GAAP EPS is forecasted at $1.25–$1.26, a ~53% YoY increase.

Guidance: Analysts anticipate Q4 revenue guidance of $61.4–61.8 billion, signaling reaccelerated growth.

2. Key Focus Areas for Investors

Data Center Dominance: Data center revenue (88–91% of total revenue in recent quarters) will be scrutinized for Blackwell GPU adoption and supply-chain execution.

Margins: Gross margins (72.4% in Q2) are critical, especially amid CoWoS packaging constraints and rising competition.

Geopolitical Risks: Export controls to China (e.g., H20 chip restrictions) could impact future sales.

AI Demand Sustainability: CEO Jensen Huang's projection of "$500 billion in AI infrastructure backlog" will be validated against actual orders.

3. Market Sentiment and Analyst Views

Analyst Ratings: 43 analysts rate NVDA.US as "Strong Buy" (97.7% bullish), with a $241.74 average target price.

Bullish Case: Citi and Wedbush expect a "beat and raise" scenario, citing insatiable AI demand exceeding supply until 2026.

Bearish Concerns:

Valuation fatigue after NVDA.US’s 37% YTD gain (as of Nov 2025).

"AI bubble" risks if spending outpaces revenue generation.

Notable investors like Peter Thiel and Michael Burry have exited or shorted NVDA.

4. Broader Implications for AI Stocks

Bellwether Role: NVDA.US’s report is seen as a litmus test for AI infrastructure spending. A strong outlook could revive sentiment across AI-related stocks (e.g., cloud providers, chip rivals like AMD.US).

Market Volatility: Options traders price in a ±6–7% stock move post-earnings—the largest implied swing in over a year.

Sector-Wide Impact: As 8% of the S&P 500, NVDA.US’s performance could influence broader indices and AI-themed ETFs.

5. Risks to Monitor

Competition: Rising adoption of custom AI chips (ASICs) by hyperscalers.

Execution Challenges: Supply constraints for Blackwell GPUs and CoWoS packaging.

Macro Pressures: High interest rates could dampen AI capex enthusiasm.

Summary Table: Key NVIDIA Earnings Metrics

Metric Consensus Estimate YoY Change Key Focus

Revenue $54.9–55.4B +56–60% Data center growth (>90% of rev)

EPS (GAAP) $1.25–1.26 +53% Profitability amid R&D costs

Data Center Revenue ~$49.1B N/A Blackwell GPU adoption

Q4 Revenue Guidance $61.4–61.8B N/A Future AI demand trajectory

Conclusion: NVIDIA's earnings are pivotal for validating the AI investment thesis. While analysts expect robust results driven by data center demand, investor reaction will hinge on guidance sustainability and margin resilience. Market participants should monitor supply-chain execution and geopolitical headwinds, as these factors could dictate near-term AI stock volatility.