We initiate coverage on Nvidia Corp with a strong buy rating and a 12-month target of $310.00. The current price implies an overly punitive 15.3 times fiscal 2028 earnings, overlooking Rubin architectural adoption and $675B in projected revenue.
Key points
- $237.42 per share prices in just 15.3 times fiscal 2028 earnings, understating durable accelerated compute and networking demand.
- 70% preliminary revenue growth guided for fiscal 2028 reflects supply-constrained orders for the Vera Rubin architecture across hyperscalers and sovereign clouds.
- $310.00 price target reflects 20.0 times fiscal 2028 earnings of $15.50 per share, delivering 30.6% upside.
The call
The market prices Nvidia as if its generational transition faces a severe cliff. At $237.42, the stock trades at 23.6 times modeled fiscal 2027 earnings and 15.3 times fiscal 2028 earnings. That valuation implies revenue growth decelerates sharply to 25% after fiscal 2027 while gross margins contract permanently from memory input costs.
Quarterly Revenue ($B) and Gross Margin (%)- Reported Revenue ($B)
- Forecast Revenue ($B)
- Gross Margin (%)
Quarterly revenue and gross margin, Q3 FY25 to Q4 FY27E. Source: Company filings, Q3 guidance, and analyst estimates.
The market is too pessimistic on architectural longevity. Hyperscale deployment of Blackwell Ultra and volume ramp of the Vera Rubin platform sustain backlogs well through fiscal 2028. We project fiscal 2028 revenue to surge 64.6% to $675 billion. Gross margins bottom at 71.5% in fiscal Q4 2027 before rebounding to 72.5%.
Valuation Sensitivity on FY28 EPS Scenarios ($)- Bear Case ($13.91 EPS)
- Base Case ($15.50 EPS)
- Bull Case ($15.98 EPS)
Projected 12-month share price across FY28 EPS estimates and forward P/E multiples. Source: Analyst estimates.
Valuation
| Driver and valuation bridge | Base estimate |
|---|
| Fiscal 2027 revenue | $410 billion |
| Fiscal 2028 revenue | $675 billion |
| Fiscal 2028 gross margin | 72.5% |
| Fiscal 2028 net income | $369 billion |
| Diluted shares outstanding | 23.8 billion |
| Fiscal 2028 diluted EPS | $15.50 |
| Target price-to-earnings multiple | 20.0 times |
| 12-month price target | $310.00 |
A 20.0 times multiple on fiscal 2028 earnings represents a conservative discount to historical technology peers growing net income above 50%. A $235 billion buyback backstops per-share value. Favorable asymmetric upside against downside support commands a strong buy rating.
Risks
- Memory cost inflation: High-bandwidth memory pricing could compress gross margins below the 71% floor guided by management, visible in fiscal Q3 2027 cost of goods sold.
- Commitment guarantees: Disclosed customer cloud infrastructure commitments and lease obligations could require cash absorption if end-customer utilization falters, visible in Note 10 off-balance-sheet footnotes.
- Regulatory friction: Scrutiny over interconnect licensing or export control extensions could delay architecture rollouts, visible in quarterly regulatory disclosures.
What would change my mind
Persistent cancellation of hyperscaler cluster orders or gross margins falling below 70% during the Rubin ramp would invalidate our target.