Key Points:
- Evercore’s analysts advise buying Nvidia stock despite concerns over potential delays in the Blackwell system.
- Nvidia’s products continue to see high demand, with significant increases in hyperscale CapEx expected in upcoming quarters.
- Even with a potential delay in Blackwell, Evercore believes Nvidia will manage the situation with minimal long-term impact on its stock.
- Evercore projects Nvidia could grow to represent 10-15% of the S&P 500 Index by 2030, with substantial earnings potential.
Evercore ISI analysts advise investors to buy Nvidia stock (NASDAQ: NVDA) ahead of the company’s upcoming earnings report for the July quarter, downplaying concerns about potential delays in Nvidia’s next-generation Blackwell system. The investment bank suggests that worries over the delay are “overdone,” emphasizing that demand for Nvidia’s products remains robust.
The analysts highlight a 20% quarter-on-quarter increase in hyperscale capital expenditure (CapEx) during Q2 2024, with expectations of further growth of 8% and 10% in Q3 and Q4, respectively. This surge in CapEx underscores strong demand for Nvidia systems, particularly among Cloud Service Providers (CSPs) and enterprises.
Earlier this month, reports suggested that Nvidia’s highly anticipated Blackwell system, which includes next-generation AI chips, could be delayed by up to three months. This news sparked investor concerns about the sustainability of Nvidia stock growth, contributing to a recent sell-off.
However, after reviewing previous instances of Nvidia product disruptions in 2008, 2022, and 2023, Evercore analysts believe that even if a delay occurs, Nvidia has consistently shown an ability to develop alternative solutions quickly. They predict that any negative news related to Blackwell could cause a short-term 5%-to-10% dip in the stock but do not foresee a long-term impact.
The analysts also note that Nvidia stock has undergone two major corrections, each exceeding 50%, in recent years: one in the latter half of 2018 and another between 2021 and 2022. Despite these corrections, the stock rebounded as CapEx peaked. With peak CapEx expected in Q4 2025 and Nvidia stock’s current price-to-earnings (P/E) ratio at 39, Evercore does not anticipate another significant sell-off before mid-2025.
Evercore continues to rank Nvidia as its “Top Tectonic Shift in Computing pick,” with the potential to capture up to 80% of the value generated in the parallel processing era. The firm projects that Nvidia could achieve more than $10 in earnings per share (EPS) by 2030 and grow to represent 10-15% of the S&P 500 Index. In the near term, Evercore has raised its third-quarter and 2024 estimates for Nvidia and increased its target price on the stock from $145 to $150.
