'Brace for range-bound trading ahead of new highs,' CT says about Nvidia stock – TipRanks.com

It's no secret Nvidia (NASDAQ:NVDA) AI rules on the chip landscape and the giant strides the semiconductor giant has made over the past few years have strengthened its position among the world's largest companies.

With AI opportunities still in play, Citi's Atif Malik, an analyst ranked 11th among Wall Street stock experts, outlines the key issues on investors' minds right now.

Gross margin trends remain a major talking point. Since the launch of the AI ​​supercycle in the middle of last year, GMs have been on an upward trajectory, reaching a high of 78.9% in the April quarter. However, in the July quarter, the margin fell to 75.7%. Malik sees that fall to less than 70%, or 72% true, in the January quarter, though once the Blackwell GPU platform fully ramps up, the analyst expects long-term gross margins to “stabilize in the mid-70s%.”

Nvidia has cornered the market for AI chips but the possibility of competitors catching up is another topic of discussion among the investor base. In this issue, while the owner points out the importance of performance metrics, the analyst believes that data center operators prioritize TCO (Total Cost of Ownership) and ROI (Return on Investment), both of which depend on throughput, an area where Nvidia excels.

“Because NVDA runs a variety of applications, including AI, data center operators rely on NVDA to get the hardware to run multiple applications, rather than purchasing accelerators limited to their use cases,” Malik further explained.

Regarding ROI, Nvidia underscored the benefits its products offer consumer Internet companies in key areas such as social media, e-commerce and search. But with generative AI driving disruptive business models, Malik advises investors to be patient as these opportunities fully develop.

That stance, however, will eventually pay off. “While we are optimistic of another strong +40% Y/Y cloud data center capex growth next year, we expect the stock to likely remain range-bound until CES January before Blackwell-driven Y/Y sales and gross margin inflection in April-Q . Malik summarized. “Fundamentally, we believe AI adoption remains in the third/fourth innings as enterprise AI demand begins with AI agents.”

To that end, Malik rates NVDA shares a buy while his $150 price target implies a 17.5% upside for the stock in the coming months. (To view owner's track record, click here)

Looking at the broad analyst consensus, aside from the three holdouts, all 38 other analysts covering Nvidia are bullish, resulting in a strong buy consensus. With an average price target of $152.44, analysts expect the stock to trade at a 13% premium in one year. (See Nvidia stock forecast)

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Disclaimer: The views expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.