'The extraordinary seems ordinary': why Wall Street has embraced Nvidia's report without enthusiasm

Global artificial intelligence market leader Nvidia beat Wall Street's revenue and profit expectations on February 26, and its sales forecast for the current quarter was better than market estimates. The company is betting that tech giants will continue to spend heavily on its AI processors. However, some analysts on Wall Street were disappointed by the lack of details on the company's expectations and the factors driving them.

Nvidia's total revenue for the quarter ended in January rose 73% year-over-year to a new record of $68.13 billion. The company now gets more than 91% of its sales from its data center division, which makes market-leading chips for artificial intelligence. Nvidia also projected first-quarter revenue of $76.4-79.6 billion, above the average forecast of $72.8 billion. However, some analysts expected figures closer to $80 billion, Bloomberg emphasizes.

In the report, Nvidia made it clear that there are concerns about the "overheating" of the AI economy. And while the company emphasized the steady growth in demand for AI computing, the question of potential threats to market share from developments by other tech giants went unanswered, Bloomberg notes.

"Nvidia's highly anticipated results were solid, but some on Wall Street were left frustrated by the lack of detail on the outlook and what drove it. While the numbers should calm AI anxiety somewhat, skepticism about competition and the sustainability of infrastructure investments will remain," said Bloomberg MLIV analyst Tatiana Darier.

Nvidia shares jumped 3.8% in extended trading after the release of the report, but then lost all the growth and even went into the red zone for a while. Investors, accustomed to the fact that the company has demonstrated strong revenue growth for 14 consecutive quarters, were probably disappointed by the lack of loud sensations in the report, which in addition was published 10 minutes later than expected, specifies Reuters.

"Traders' expectations for Nvidia were already priced in, leaving little room for further upside," said Pepperstone Group research strategist Dilyn Wu(quoted by Bloomberg).

Deepwater Asset Management managing partner Gene Munster said the gap between Nvidia's strong announcements and its stock performance boils down to one question: whether investors believe the "AI rally" is coming to an end or just beginning, Yahoo Finance points out .

"The key question now is what the growth between 2027 and 2028 will turn out to be," says Munster. - Investors essentially need to understand what stage of development the artificial intelligence infrastructure is at. If it's the fifth inning (a baseball term for the last part of the game. - Oninvest) of building artificial intelligence, growth will likely slow in 2027. And if it's only the second, which I'm leaning toward, then Nvidia still has strong growth potential for several years to come."

Nvidia shares are now outperforming all of its mega-capitalization peers, Bloomberg reports. As of the close of trading on Feb. 25, the stock was up 5% at 2026, while the Nasdaq index was down 0.4%.

TD Cowen analyst Joshua Buchalter reiterated a Buy rating on Nvidia stock after the reports were released, with a $235 target price, implying a 20% upside potential. Buchalter called Nvidia his "top pick," noting that the company makes the "extraordinary seem ordinary," TipRanks writes. The four major hyperscalers are expected to spend between $650 billion and $700 billion on capital expenditures this year, giving Nvidia the green light across the board.

The analyst expects growth through 2026, with revenue from the Blackwell and Rubin platforms likely to exceed the $500 billion target. He noted that despite strong fundamentals, Nvidia shares are trading at a discount to historical estimates and peers due to investor skepticism about the sustainability of the AI trend.

Mizuho Securities analyst Vijay Rakesh also maintained a Buy rating and $275 target price, assuming a 40.6% upside.

Most analysts tracking Nvidia securities believe the stock will rise and is worth entering a position. According to MarketWatch, 68 analysts recommend buying the stock, five recommend holding and one recommends selling.

This article was AI-translated and verified by a human editor