As NVIDIA's quarterly earnings draw ever closer, Wall Street analysts are churning out their takes on the GPU manufacturer's prospects with growing regularity. After Citi appreciated NVIDIA's newfound attractive valuation post DeepSeek-induced swoon earlier this week, Morgan Stanley is out today with its much more bullish take on NVIDIA's near-term stock price trajectory.
As a refresher, China-based DeepSeek recently shocked the global tech sector with its breakthrough R1 model, which is able to more than compete with OpenAI's o1 model but with just around 1/50th of the typical costs associated with training a complex LLM. However, a new analysis has since then postulated that DeepSeek's CapEx might have been as high as $1.6 billion, entailing operating costs of as much as $944 million.
Nonetheless, DeepSeek's R1 model has unleashed a renewed focus on efficiency to the possible detriment of NVIDIA.
Coming back, Morgan Stanley continues to see NVIDIA's recent selloff as a "buying opportunity." Nonetheless, the Wall Street titan concedes that the DeepSeek phenomenon has increased "long-term uncertainties" for NVIDIA, and created "some challenges," albeit manageable ones.
Morgan Stanley feels that the demand for Hopper and Blackwell chips remains "solid" in the near-term and that the overarching confidence in NVIDIA's growth story will return in the second half of 2025 with a renewed focus on AI inference and ASIC-related enthusiasm.
Of course, the growing severity of US chip-based export curbs in relation to China is a key risk for NVIDIA. However, Morgan Stanley remains confident that the GPU manufacturer will be able to wade through these turbulent currents.
Elsewhere, a lack of retrenchment among hyperscalers also supports Morgan Stanley's bullish view around NVIDIA. We noted recently that Microsoft, Google, Meta, and Tesla have continued to project elevated CapEx for 2025, despite the DeepSeek phenomenon.
NVDA Jan-Q earnings due 2/26 post-market.
• Sales Forecast: Expected ~$38B for Jan-Q, $42.5B for Apr-Q with Blackwell ramp-up mid-year.
• Valuation: NVDA stock at mid-20s P/E, 25% below ASIC peers after sell-off on AI concerns.
• Outlook: Bullish despite recent range-bound… https://t.co/tQBwe4kn9l
— *Walter Bloomberg (@DeItaone) February 6, 2025
Meanwhile, as mentioned earlier, Citi now expects NVIDIA to report $38 billion in revenue for its January-ending quarter, and a whopping $42.5 billion for the April-ending one, bolstered by the Blackwell production ramp-up by mid-year.
Interestingly, given the recent correction in NVIDIA shares, Citi has calculated that the stock now has a P/E ratio in the "mid-20s," around 25 percent below its ASIC peers!
Finally, Citi expects NVIDIA's margins to bottom out in the April-ending quarter.
Given the growing chip restrictions on China, Citi has slightly reduced its price target for NVIDIA shares from $175 to $163 while maintaining an overall 'buy' rating.
About the author: Writing is my one incontrovertible passion. Over the past six years, he has authored over 2,200 distinct articles on financial and tech-related topics, spanning nearly 1 million words. And he has been a member of Wcctech mobile team since 2025. As an alumnus of the University of Toronto, Rotman Commerce Program, I bring nuance, in-depth knowledge, and a unique perspective to every topic that I cover. When I'm not writing, I'm traveling the world, exploring hidden confectionaries and restaurants as an aspiring food connoisseur.
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