This is an article from Seeking Alpha. I don’t normally respect their articles but completely agree with this one.
Nvidia: I Predicted $150 By Year End - I Was Dead Wrong
Jun. 06, 2025 9:40 AM ETNVIDIA Corporation (NVDA) Stock, NVDA:CA StockAMD, AMD:CA, INTC, INTC:CA, NVDA, NVDA:CA22 Comments
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Summary
Nvidia Corporation's momentum is stronger than what I initially anticipated.
I reaffirm my Strong Buy rating after spectacular growth results, even with the tariff drama, the DeepSeek fears, and the new export restrictions.
Despite an $8B headwind, Nvidia guides for 50% YoY revenue growth next quarter, with potential upside from an upcoming export-compliant AI chip, the B30.
The Street’s expectations are sky-high. Nvidia has been beating forecasts by smaller margins lately. If they fall short on revenue, it could lead to an NVDA stock selloff.
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In my previous coverage of Nvidia Corporation (NVDA), I predicted the stock would test the $150 price level by year-end.
I was dead wrong.
At this pace, I believe the stock will reach my price target in the next month or two.
With the recent earnings season, it's time to revisit my bull case. I advance in this intro that my biggest concern of a growth slowdown in the data center compute segment due to tariffs is now gone after Nvidia reported a 76% YOY revenue increase in the past quarter in this segment.
Furthermore, management reaffirmed their gross margin target of mid-70s% by year-end. I believe one of the drivers is the drop in lower margin sales to China, following the new export controls that limit sales of the H20 AI chip in this region.
As you are about to find out, the biggest risk to my bull case is the fact that The Street is starting to take this level of outperformance for granted. If Nvidia fails to hit the market with the B30 (an upcoming export-compliant replacement of the H20), and considering the $8 billion headwind expected in FQ2 2025, I believe the company is at risk of missing the top-line consensus. As for when this risk might materialize, I honestly don’t know, and I don’t think anyone else does either. But it’s a risk worth keeping in mind.
Is this risk enough to grant this stock anything less than a strong buy? I believe the answer is no. Below, I break down the reasons why.
Data Center Growth Intact
Given the kerfuffle over reciprocal and sectoral tariffs that led to a 20% drop in the S&P 500 Index (SP500, SPX), tanking almost every growth stock in the U.S., I was curious to see if the demand for AI had shown any signs of weakness.
In my view, one of the best ways to check that is by looking at Nvidia’s financial statements.
Nvidia 10-Q FQ1 2026
Nvidia 10-Q FQ1 2026
Total data center revenue was up by 73% YOY. Below is a chart showing the trend for the past few years.
Chart preview
FinChat
To put Nvidia's data center revenue into context, I thought about adding a chart below that compares it with Advanced Micro Devices' (AMD) and Intel’s (INTC) data center revenue.
Chart preview
FinChat
The difference is abysmal, to say the least.
Traditionally, Nvidia's CFOs have been kind enough to break down the data center segment by splitting the contributions of compute (i.e., GPUs like the Blackwell and CPUs like the Grace) and networking (i.e., network switches, like the Quantum-X800 InfiniBand).
Well, it turns out that data center compute was up by 76% YOY in the last quarter, surpassing the overall data center growth. If this is not a sign that demand for AI is intact, I don't know what is.
To me, the data center compute segment is the best way to really understand what's going on with the demand for AI. Why is that?
Data center infrastructure companies, like Nebius (NBIS) or CoreWeave (CRWV), along with hyperscalers like Microsoft (MSFT), Meta (META), Google (GOOGL) (GOOG), and Amazon's (AMZN) AWS, need Nvidia's AI accelerators to satisfy the insane computing demand for their own (or their customers) large language models, or LLMs. Why did I use the word insane?
Well, here is a fun fact from CFO Colette Kress during the latest earnings conference call (emphasis added):
On average, major hyperscalers are each deploying nearly 1,000 NVL72 racks or 72,000 Blackwell GPUs per week and are on track to further ramp output this quarter.
To put this insane demand for computing power into perspective, Azure OpenAI processed more than 100 trillion tokens in the last quarter. That's a 5x increase from the same period last year.
Unsurprisingly, the rapid adoption of the Blackwell architecture, particularly the GB200 AI chip, comprised of 36 Grace CPUs + 72 Blackwell GPU, used in the GB200 NVL72 rack (composed of 36 GB200 AI chips) is driving the high double-digit growth rates in the data center segment.
According to CFO Colette, most of the revenue in the data center compute segment comes from the Blackwell series (emphasis added):
Blackwell contributed nearly 70% of Data Center compute revenue in the quarter with a transition from Hopper nearly complete.
The new(ish) GPU family surely means higher margins for the company, right? Yes and no. More details on the next section.
The Decline In Gross Margins
I have a close friend who buys stocks that make sense (like me, he is also a sub blue-collar practitioner). But unlike me, he never checks the news or reads conference call transcripts.
If you’re not familiar with Nvidia’s story, the trend in its gross margin might really catch you off guard. Here’s a chart that shows what I mean.
Chart preview
FinChat
Yikes! 60% gross margin in the past quarter, the lowest since Q1 2023 (emphasis, 2023 not 2024). We're talking about a 1300 bps sequential decline. What happened?
Well, the US administration is curbing China’s access to AI accelerators from Nvidia, AMD, and Intel. In the infamous April 15 8-K filing, Nvidia informed its shareholders that the export controls to China (including Hong Kong, Macau, and D:5 countries) are expected to lead to $5.5 billion in inventory charges associated with the H20 GPUs.
Well, it turns out that the headwind was lower than expected. Nvidia reported $4.5 billion in inventory charges in FQ1 2026, as they reused certain materials from the H20s. Naturally, this write-down led to an increase in COGS, which tanked gross margins.
Chart preview
FinChat
In the earnings call, the CFO stated that, excluding this charge, the FQ1 non GAAP gross margin would have been 71% (in line with the expectation in FQ4 2025). Therefore, I'm not sweating a drop about the apparent decline in gross margins, as Nvidia's core GPU (i.e., the Blackwell series) is still driving spectacular margins.
From a revenue perspective, Nvidia expects a decline of $8 billion in FQ2 2026 due to the export control rules related to the H20. Even with this headwind, the CFO projected $45 billion in revenue, plus or minus 2%. That's a 50% YOY increase and approximately $1 billion more than in the past quarter. Not bad considering that China accounted for 12.5% of last quarter's revenue. From a margins perspective, the company is guiding a non-GAAP gross margin of 72% (driven by the higher margin sales of the Blackwell series). Furthermore, management has reaffirmed their mid-70% non-GAAP gross margin target for the end of this fiscal year. In other words, less (lower margin) sales in China mean higher margins for the company.
As a final note, Nvidia hasn't completely ditched the China region. According to recent reports, the company is currently working on the B30 AI chip, which is designed to meet the current export control restrictions. I recommend keeping a close eye on the development of this new AI chip, as it could reignite sales in this region.
Price Action
To my eyes, the chart below looks great. The stock is on track to test all-time highs and, considering the strong narrative and growth, I believe it will break the $150 support over the next few months. I just don't see anything material prior to FQ2 2026 earnings that could stop this momentum. That said, remember the following quote from Taleb: absence of evidence is not evidence of absence.
Trading View
TradingView
Finally, the RSI is at a healthy level, despite the rally since early April.
Institutional Activity
A quick look at the 13F data for Q1 2025 shows what one would initially expect: a slight decline in institutional ownership and new positions in this stock. Please bear in mind that this data is compiled until the end of March. With "liberation day" just a few days later, I am not surprised to see funds not buying this stock in Q1.
Whale Wisdom
Whale Wisdom
With Q2 coming soon to an end, I recommend keeping a close eye on institutional activity once the 13Fs are fully complied at the end of the 45-day deadline (i.e., mid-July). In my view, it would be highly favorable to see a double-digit increase in new positions, along with an increase in the number of funds holding this stock.
Risks
The problem with growing at a fast pace is that the Street starts to expect it. Check out the chart below to see how often revenue has beaten analyst forecasts (and by how much).
Seeking Alpha
Seeking Alpha
The top-line surprise in the past quarter was the lowest since FQ4 2023. Therefore, the biggest risk that I see right now is a miss due to a slower than expected quarter. I have no doubt that would trigger a high single digit selloff.
Other risks include the Trump administration banning the B30 AI chips. As I said, Nvidia is still in the design phase, according to some reports. If the company fails to hit the market with the B30s, I believe the risk of missing the analyst consensus for the top line is quite real.
Conclusion
To wrap up, I reiterate my Strong Buy rating. The recent earnings report shows that the growth in the data center compute segment is intact, despite the tariff drama earlier this year. Speaking of dramas, the new export controls related to the H20 AI chips have led to a considerable decline in gross margins. Did the market care about this? I believe the answer is no, as gross margins when excluding this headwind, were in line with the company's FQ4 2025 guidance.
With regard to guidance, management expects revenue to grow by 50% YOY in the next quarter, despite the $8 billion headwind in sales due to the ban of the H20 sales in China. It seems that the company is already working in a fully compliant new generation of AI chips, the B30, which could bring back some of the revenue loss in China.
Overall, I see the narrative intact, the growth impressive, and even though the Street is pricing in this outperformance, I believe there is still an upside ahead. I foresee a short life for the $150 support level.
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