Buy Nvidia stock as supply chain fears are overblown: Jefferies

Published 21/02/2025, 14:36
© Reuters

Investing.com -- Jefferies analysts voiced an optimistic view heading into Nvidia’s (NASDAQ:NVDA) earnings next week, noting that the recent supply chain concerns are overblown.

The chipmaker’s shares have rallied over the past month, and have been trading within a certain range since November 24, 2022, mainly due to investor fears over a slower ramp in Blackwell shipments.

While these supply chain headwinds “are real,” Jefferies analysts led by Blayne Curtis believe that Nvidia can still deliver a better-than-expected performance.

“The DeepSeek impact has largely reversed and newsflow has turned positive with hyperscalers all discussing rising capex numbers,” analysts noted.

They continue to favor Nvidia stock during product ramps, anticipating a sharp acceleration as the GB200 product ramps up throughout the year, particularly ahead of potential announcements at the upcoming GTC conference.

Jefferies expects another quarter where Nvidia will beat expectations and possibly raise its guidance, although the extent of the outperformance may not be as large as the usual $2-3 billion range.

The investment bank thinks the frequency and magnitude of these beats will grow in the second half of the year as the GB200 becomes a more significant factor in Nvidia’s revenue.

“Overall, we see continued momentum into earnings and GTC and believe the supply chain fears are overblown,” analysts concluded.

Nvidia’s earnings report next week could play a key role in shaping the direction of the US stock market, as investors look for reassurance that the AI-driven rally, which has fueled equities for the past two years, remains on track following last month’s selloff sparked by Chinese startup DeepSeek.

As a key player in the expanding AI sector, Nvidia holds a 6.3% weighting in the S&P 500, according to LSEG, making it the second most valuable company in the world. Its stock has surged more than 550% over the past two years.

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