Citi Anticipates Strong Future for Nvidia Ahead of CES

Citi Anticipates Strong Future for Nvidia Ahead of CES

Citi has placed Nvidia (NASDAQ: NVDA) on a 90-day Upside Catalyst Watch, anticipating significant announcements during the upcoming CES event in January 2025.

Key Developments Expected

The financial institution expects Nvidia to unveil important updates, particularly regarding its Blackwell product line. Additionally, it is likely that the company will provide insights into improvements in gross margins and discuss growth opportunities in AI-driven industrial and robotics applications.

Recent Financial Performance

Nvidia has shown impressive performance, with its October quarter revenue reaching $35 billion, surpassing forecasts of $34 billion. The company's guidance for the January quarter stands at $37.5 billion, aligning with market expectations, showcasing its resilience in a competitive landscape.

Critical Topics Discussed

During a recent earnings call, Nvidia management addressed pivotal topics, including an accelerating Blackwell ramp-up, which is projected to significantly contribute to sales in the January quarter. Analysts note the trajectory of gross margins, expected to hit a low point in the April quarter before recovering to the mid-70% range later in the fiscal year.

Strength in AI Demand

Citi highlighted Nvidia's robust growth in AI scaling, which covers aspects such as pre-training, post-training, and inference, fueling heightened demand for compute power across various sectors.

Networking Demand Insights

Despite experiencing a decline in networking demand quarter-over-quarter due to supply chain challenges in optics, Citi analysts are confident a rebound is on the horizon for the January quarter, reinforcing the company's optimistic outlook.

Looking Forward to CES

Analysts remain optimistic about Nvidia's prospects at CES, where CEO Jensen Huang is scheduled to deliver the opening keynote on January 6. The company will also host a financial analyst Q&A session the following day, providing an opportunity for further engagement with investors and industry stakeholders.

Expectations from Keynote

The firm expects Nvidia to highlight its increased expectations for Blackwell sales, discuss anticipated margin recovery, and elaborate on a demand inflection for AI-driven robotics in settings such as warehouses and manufacturing facilities.

Citi's Rating and Price Target

Citi maintains a Buy rating on Nvidia, raising its price target from $160 to $175. This revision reflects the company's enduring 35x P/E valuation and projected earnings growth trajectory, underscoring its strong market position.

Frequently Asked Questions

What is the significance of the 90-day Upside Catalyst Watch for Nvidia?

This watch indicates that Citi expects significant developments for Nvidia soon, particularly leading up to CES, which could positively impact the stock price.

What key announcements are anticipated from Nvidia during CES?

Analysts expect Nvidia to provide updates on its Blackwell product line, gross margins, and AI-driven business opportunities in robotics and industrial applications.

How did Nvidia perform in its most recent quarter?

Nvidia reported a revenue of $35 billion in the October quarter, exceeding market expectations of $34 billion, which showcases strong operational performance.

What are the expectations for Nvidia's gross margins?

Citi forecasts that Nvidia's gross margins will hit a trough in the April quarter but will recover to the mid-70% range in the latter half of the fiscal year.

What does Citi's price target upgrade imply for Nvidia?

The increase in Citi's price target from $160 to $175 suggests confidence in Nvidia's ongoing growth and profitability, reflecting a positive view of the company's future performance.

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