Nvidia stock dubbed ‘top pick’ ahead of Q2 earnings

Nvidia (NVDA) stock is in focus on Friday after BMO Capital Markets said the chipmaker remains a “top pick” for those seeking exposure to the global artificial intelligence (AI) buildouts.  

Analyst Harsh Kumar announced an Outperform rating and $340 price target on the semiconductor behemoth heading into its fiscal Q2 earnings set to be released on August 26^th (after market close).

Ahead of the earnings event, Nvidia stock is up over 30% versus its year-to-date low.  

Why BMO analyst is bullish on Nvidia stock

BMO’s bullish thesis starts with Nvidia’s unusually strong position across the AI computing stack.

Kumar said the giant’s AI systems are “fully booked for the next 12 months as demand exceeds supply,” a striking assessment heading into its earnings report.

That level of visibility matters because it suggests NVDA shares’ growth story is being supported by actual customer demand rather than simply elevated expectations around AI spending.

BMO also expects Nvidia’s next-gen Vera Rubin NVL72 system to begin ramping in the back half of the year.

The new platform could provide another leg of growth as hyperscalers and other large customers continue expanding AI infrastructure.

Kumar’s broader view is that AI remains in “the early innings,” with capital expenditures expected to rise for years as demand for AI tokens and computing capacity expands.

Is NVDA shares’ valuation justified?

Crucially, BMO does not believe Nvidia’s valuation has become excessive relative to its expected growth.

Kumar pointed to the stock’s 18x forward price-to-earnings (P/E) multiple – calling that valuation “a discount” when measured against the firm’s expected revenue growth.

According to him, NVDA could grow revenue by 84% in fiscal 2027 and another 50% in the year after.

His argument goes directly against one of the biggest concerns surrounding Nvidia shares: whether the stock already prices in too much of the AI boom.

At roughly $216, Nvidia remains below its $236 high and has recently struggled to regain its May peak.

The combination of a still-elevated growth rate, massive AI infrastructure demand and a valuation BMO considers compelling gives the bull case more substance than simply betting on another AI-driven rally.

What to expect from Nvidia’s Q2 earnings next week

Wall Street’s expectations for Nvidia Corp’s fiscal Q2 results are already enormous.

Consensus estimates call for about $92.16 billion in revenue and $2.09 in adjusted earnings per share, representing year-over-year growth of about 96% and 99%, respectively.

The underlying strength in Nvidia’s financials reflects sustained demand for its AI chips – as cloud providers and other major tech firms continue committing enormous sums to AI infrastructure.

Note that NVDA stock also currently pays a small dividend yield of 0.46%, which makes it even more attractive as a long-term holding.

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