Nvidia’s (NASDAQ:NVDA) ascent to its position as the world’s 3rd most valuable company was built on a series of earnings reports that blew Street estimates out of the water. This phenomenal growth was driven primarily by its Data Center business, which includes its best-in-class AI chips. Overall, Nvidia’s stock has risen by 215% over the last 12 months.
So, essentially Wall Street was underestimating the big AI opportunity Nvidia was set to grab and make the most of. Now, says HSBC analyst Frank Lee, the chip giant has another ace up its sleeve which will spring a surprise vs. current expectations.
“We believe Nvidia will continue to demonstrate its strong pricing power via its NVL36/NVL72 server rack system and GB200 platform, which will once again surprise the market on the upside in FY26 (FY ending Jan),” Lee opined.
Since the March GTC event, Lee thinks the market now recognizes how significant the GB200 platform will be in driving revenue and earnings for FY26, particularly due to the substantial ASP (average selling price) pricing power associated with its GB200 chip. “However,” Lee goes on to add, “since the GTC event, we now believe Nvidia’s key focus in FY26 will be around its server rack architecture.”
And here, as noted above, Lee thinks the server rack’s potential is not fully understood. Lee had initially predicted that the 2025 AI product roadmap would result in “significant pricing upside,” with the GB200 projected to sell between $60,000 and $70,000 compared to the $30,000 to $35,000 price range of the standalone B100 GPU. Now, with the server rack models NVL36 and NVL72 priced at $1.8 million and $3 million respectively, and an expected sales volume of 35,000 units, the analyst has become “even more bullish,” believing Nvidia could potentially generate FY26 revenue of $196 billion. To give an idea of how much that differs from the consensus view, consider the Street has revenue for that period reaching $140 billion, 40% below Lee’s forecast. The discrepancy extends to the bottom-line too, with Lee calling for FY26 EPS of $45.16, whereas the consensus estimate stands 43% below that, at $31.51.
More in the here and now, looking ahead to the F1Q25 print (January quarter), Lee expects revenue of $26 billion, above both the $24 billion guide and the Street’s forecast of $24.5 billion. Lee also sees the potential for F2Q25 sales of $28 billion, again trumping the analysts’ call for $26.8 billion. That said, Lee thinks that FY25 will potentially be a “transition year ahead of its FY26 roadmap ramp up” and therefore sees “limited room for significant earnings upside” over the next two quarters.
Nevertheless, the longer-term bullish outlook results in a new price target. Lee’s objective now stands at $1,350 (up from $1,050) and set to deliver returns of 50% a year from now. No need to add, but Lee’s rating stays a Buy. (To watch Lee’s track record, click here)
Lee’s take gets plenty of support amongst his colleagues. The 41 analyst reviews submitted in recent months break down into 39 Buys and 2 Holds, naturally coalescing to a Strong Buy consensus rating. However, the average price target is a more muted one; at $1,016 and change, the figure suggests the stock will climb 13% higher over the coming months. (See Nvidia stock forecast)
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Disclaimer: The opinions 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.
