Not just stellar performance! Goldman Sachs highlights three catalysts for NVIDIA, stating that "the path to outperform in the coming months is now clear"

NVIDIA’s latest quarterly earnings and future financial guidance have completely exceeded Wall Street expectations. In a recent research report, Goldman Sachs clearly stated that the path for this chip giant to outperform the market in the coming months has become exceptionally clear.

Driven by sustained strong capital expenditures from large-scale cloud service providers, NVIDIA’s first-quarter revenue guidance significantly surpassed market consensus. According to sources from Wind Trading Platform, Goldman Sachs analyst James Schneider and his team reaffirmed a “Buy” rating on the stock and maintained a $250 target price, implying nearly 28% upside from current levels. This move is expected to further boost market confidence in the entire AI infrastructure sector.

The market’s optimistic sentiment is not just based on historical performance. Goldman Sachs proactively pointed out three core catalysts fueling NVIDIA’s continued strength: upward revisions in large-scale enterprise capital spending, increased visibility of expenditures following AI startup funding rounds, and the release of new-generation architecture-based AI models that will once again demonstrate its technological moat.

Additionally, NVIDIA’s recent deep strategic collaborations and billion-dollar investments with top tech giants like Meta, OpenAI, and Anthropic have not only secured future order fundamentals but also created broad positive spillover effects across the global tech supply chain, including storage and semiconductor equipment.

Earnings and Guidance Surpass Market Expectations

NVIDIA achieved $68.1 billion in revenue in the fourth quarter, surpassing Goldman Sachs’ forecast of $67.3 billion and significantly exceeding Wall Street’s consensus of $66.2 billion. The core data center business remains the absolute engine, with quarterly revenue reaching $62.3 billion. In terms of profit quality, gross margin of 75.2% and operating margin of 67.7% both performed steadily, with adjusted earnings per share of $1.76, fully surpassing market expectations.

More notably, its extremely strong future guidance has attracted market attention. NVIDIA expects the median of first-quarter revenue to reach $78 billion, well above Wall Street’s forecast of $72.1 billion. Although the company has included approximately $1.9 billion in stock-based compensation expenses in its non-GAAP guidance due to accounting changes, the adjusted EPS guidance of $1.79 still clearly outperforms the market expectation of $1.67.

Three Core Catalysts Establish Outperformance Path

Goldman Sachs explicitly stated in the report that, unlike some previous quarters, three major factors now make NVIDIA’s path to outperform the broader market in the coming months more apparent.

First, the upward potential for large-scale cloud providers’ capital expenditures through 2026 remains, with early signs of growth in 2027, indicating sustained demand support from NVIDIA’s core downstream customers.

Second, for non-traditional clients like OpenAI and Anthropic, procurement visibility through 2027 will significantly improve as their funding rounds materialize. NVIDIA disclosed ongoing active negotiations with OpenAI regarding investments and collaborations, expecting to finalize agreements soon; meanwhile, it has completed a $10 billion investment in Anthropic, with the deal including training its large language models based on Blackwell and Rubin architectures.

Third, as new AI models based on the Blackwell architecture are launched to market, NVIDIA will once again demonstrate its technological leadership over AI chip competitors in the coming months, providing more tangible evidence of its competitive differentiation.

Alliances with Tech Giants and Margin Resilience

In terms of business expansion, NVIDIA is strengthening its ecosystem moat through intensive investments and collaborations. The report notes that NVIDIA is still actively negotiating with OpenAI on investments and partnerships, with final agreements expected soon. Meanwhile, the company has completed a significant $10 billion investment in Anthropic, which has agreed to train its large language models on Blackwell and Rubin architectures. Additionally, NVIDIA announced a broad collaboration with Meta, providing various data center products, and plans to deploy Vera CPU in 2027, with Vera Rubin NVL72 integrated into large-scale applications like WhatsApp.

Regarding concerns over the impact of rising high-bandwidth memory prices on profit margins, NVIDIA provided reassurance. The company expects to maintain gross margins around 75% throughout the 2026 calendar year. Goldman Sachs analysts believe this margin resilience is mainly due to the company’s substantial memory-related pre-purchasing commitments made in 2025.

Widespread Supply Chain Spillover Effects and Potential Risks

NVIDIA’s strong data center guidance not only benefits itself but also signals a clear bullish outlook for the entire semiconductor sector. Goldman Sachs emphasizes that this reflects a highly robust AI spending environment, favoring digital semiconductor stocks like Broadcom and AMD, and to some extent benefiting Marvell and ARM.

However, Goldman Sachs also highlighted four main downside risks at the end of the report: unexpected slowdown in AI infrastructure spending, market share loss due to intensified competition, profit margin erosion from price wars, and ongoing supply chain shortages that have already affected the gaming business and are expected to persist in Q1.

This insightful content is from Wind Trading Platform.

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