Under Jensen Huang’s unmatched leadership, NVDA stock became the darling of AI and tech investors, and now that the company is reporting its first quarter earnings on May 22nd, many analysts are expecting stunning results.
However, what really adds to the Nvidia (NASDAQ: NVDA) bull case is a new estimate by HSBC (NYSE: HSBC) analysts, and it’s their expectations for how much the new Blackwell GPUs will cost. HSBC recently set a price target of $1,350 on NVDA stock, indicating an upside of nearly 46%, but their new Blackwell estimates are even more bullish than this.
HSBC’s Aggressive Blackwell Estimates
Recently, Nvidia shared some critical performance metrics for its Blackwell accelerators when compared to its older Hopper GPUs in a post on their website. According to the company, the Blackwell GPUs will offer generative AI on trillion-parameter large language models at up to 25 times less cost and energy consumption than the Hopper chips. Also, they are said to simulate weather patterns at a 200 times lower cost while consuming 300 times less energy. The company also announced that its GB200 server with the B200 GPU will offer 30 times higher throughput while using less energy and lower total cost of operation compared to 72 x86 CPUs.
The bank estimates that Nvidia’s B100 GPU will have an average selling price between $30,000 and $35,000, which is at least within the range of the price of Nvidia’s H100. On the other hand, the more powerful GB200, which combines a single Grace CPU with two B200 GPUs, will reportedly cost between $60,000 and $70,000.
Demand for Nvidia’s AI chips is already very high. According to Statista, AI chip market revenue will hit $341 billion in 2033, and Nvidia has more than 80% of this market already, so expect the company to have the biggest stake in this number. However, given that its new, powerful chips could go for as much as $70,000 and companies need thousands of chips to develop AI technologies, we should expect Nvidia’s revenues to skyrocket even more in the future.
Nvidia’s Servers Play
Investors should keep in mind that Nvidia may be more inclined to sell servers based on the Blackwell GPUs rather than selling chips separately, especially given that the B200 servers are projected to cost up to $3 million apiece. With that being said, servers based on Nvidia’s designs are going to be much more expensive than the single chip. In fact, Nvidia’s GB200 NVL36 with 36 GB200 Superchips, consisting of 18 Grace CPUs and 36 enhanced B200 GPUs, may be sold for $1.8 million on average, whereas the Nvidia GB200 NVL72 with 72 GB200 Superchips, comprising of 36 CPUs and 72 GPUs, could have a price of around $3 million, according to the HSBC numbers.
Additionally, it might actually end up costing quite a bit more than that, as these are merely analyst estimates. Also, when Nvidia CEO Jensen Huang revealed the Blackwell data center chips at this year’s GTC 2024, it was quite obvious that the intent was to move whole racks of servers. During this year’s GTC event, Jensen repeatedly stated that when he thinks of a GPU, he pictures selling whole systems instead of standalone GPUs or superchips, and this would enable Nvidia to absorb some of the premium earned by system integrators, which will increase its revenues and profitability. The NVL72 is estimated to cost around $3 million alone, so if a couple of companies purchase a couple of racks, this means that they will become money printing machines for Nvidia.
However, it should also be kept in mind that the actual prices of data center-grade hardware always depend on the individual contracts, based on the volume of hardware ordered and other negotiations. As such, large buyers like Amazon (NASDAQ: AMZN) and Microsoft (NASDAQ: MSFT) will likely get huge discounts, while smaller clients may have to pay an even higher price than what HSBC reports.
Melius Research is Bullish on NVDA Stock
According to Melius Research analyst Ben Reitzes, Nvidia could beat its revenue guidance of $24 billion for the quarter by around $2 billion, and guide for a further $2 billion in revenue growth in the current quarter. This forecast is more optimistic than the consensus on Wall Street, which calls for revenue of $24.51 billion for Nvidia’s first quarter, rising to $26.52 billion in its second quarter. On the other hand, Melius is backing Nvidia to shake off competition from rivals and customers making their own chips to power artificial intelligence systems.
In their recent research note, they said that hyperscalers talk big game about custom chips, but they still need to buy Nvidia’s H100s to beat cloud estimates and complete internal initiatives, adding that they remain optimistic that Nvidia’s share of inferencing will be strong, especially given the rise of video generation. Notably, Melius has a Buy rating and a $1,125 price target on NVDA stock.
Should You Buy NVDA Stock Before Earnings?
As long as GPUs remain the key for AI workload acceleration, and Nvidia maintains its leading position in the market, NVDA stock will look like a strong buy. What’s even better is that the company is expanding into CPUs and networking, expecting multibillion-dollar revenues, and its software and services also show promising growth.
That said, analysts are almost singularly focused on the company’s AI segment growth, and that’s because this is the area of the business with the most robust growth potential over the long-term. This is because demand for computing is expected to rise, and since it’s expected to come from the AI space, Nvidia has a real shot of completely disrupting this emergent and rapidly evolving sector. While Nvidia’s forward PE ratio of 36 times may seem high, it’s also true that the company’s triple-digit sales growth justifies this multiple.
However, Nvidia may have previously set low profit targets, potentially driving further stock growth. For now, we’ll just have to wait and see. Analysts expect a sharp move ahead of Nvidia’s earnings, with a 17% upside forecasted. Meanwhile, the company’s recent earnings report showed substantial revenue and net income, but sequential growth slowed to 22%. However, such small bumps in the road shouldn’t discourage investors. In the long-run, Nvidia is a must-have stock in every investor’s portfolio as AI is still in its very early innings of growth.
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