NVDA Needs To Diversify Beyond Cloud Giants To Sustain AI Rally, Says HSBC — Dan Ives Says Jensen Huang Holds Best Read On Enterprise AI Demand

• HSBC expects Nvidia to deliver another “beat and raise” quarter, extending a streak of earnings reports that have topped estimates and pushed guidance expectations higher.
• The analyst, Frank Lee, noted that Nvidia shares have still underperformed peers over the past six months despite two major conference events and two strong sets of financial results.
• He added that Nvidia has increasingly been striking deals outside its core cloud customer base, a trend he expects to remain a key focus going forward.

AI bellwether Nvidia Corp. (NVDA) needs to show the evidence of diversification of its non-cloud customer base to sustain the ongoing rally, said HSBC analyst Frank Lee.

According to TheFly, Lee stated Nvidia needs to demonstrate this diversification in order to fuel its AI graphics processing unit momentum.

Nvidia shares were down 1% in Tuesday’s pre-market trade.

HSBC’s New NVDA Price Target

Despite stating what Nvidia needs to do for the next round of re-rating, Lee raised HSBC’s price target for NVDA to $325 from $295, while maintaining a ‘Buy’ rating.

The firm’s new price target implies an upside potential of over 46% from NVDA stock’s current levels.

What To Expect From NVDA Q1 Earnings?

HSBC expects Nvidia to post yet another beat-and-raise quarter. However, Lee noted that Nvidia's shares have lagged peers over the past six months, even after the company hosted two major conference events and delivered two earnings reports that topped estimates and lifted guidance.

Nvidia is set to report its first quarter (Q1) results on Wednesday after the bell. The company is expected to report earnings per share (EPS) of $1.77 on revenue of $79.12 billion during the quarter, according to Fiscal.ai data.

Nvidia reported an EPS of $0.81 on revenue of $44.06 billion during the same period a year ago.

What Will Drive NVDA’s Next Re-Rating?

According to a CNBC report, Lee added that the next re-rerating for Nvidia will likely depend on a new growth narrative beyond selling AI GPUs to traditional hyperscalers.

He noted that Nvidia has increasingly been striking deals outside its core cloud customer base, a trend he expects to remain a key focus going forward.

Lee added that the market is already largely familiar with Nvidia’s current GPU roadmap and the pricing increases tied to it.

Ives Says NVDA’s Huang Best Placed To Talk About Demand

Dan Ives, Global Head of Tech Research at Wedbush, stated in a post on X that Nvidia remains at the center of the artificial intelligence revolution. He added that the company’s GPUs continue to serve as the backbone for AI infrastructure across cloud providers, enterprises, and governments.

“There is one company that is the foundation for the AI Revolution and that is Nvidia with the Godfather of AI Jensen having the best perch and vantage point to discuss overall enterprise AI demand and the appetite for Nvidia's AI chips looking forward,” he said.

NVDA stock is up 19% year-to-date and 64% over the past 12 months. The S&P 500 ETF (SPY) is up 24% over the past 12 months, while the Invesco QQQ Trust ETF (QQQ) is up 35%.

The Vanguard Information Technology Index Fund ETF (VGT) is up 45% over the past 12 months, while the iShares Russell 1000 Growth ETF (IWF) is up 24%.

Also See: Michael Burry Warns Of AI Debt Frenzy As 87% Of VC Funding Floods Sector — ‘Less Than 40%’ Went To Internet Companies During Dot-Com Era

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