• Evercore ISI reaffirms Outperform rating and $261 price target on Nvidia
  • Firm expects beat-and-raise quarter driven by strong AI demand and improved GB200/GB300 supply
  • Stock seen as undervalued at 30× forward earnings with 0.55 PEG ratio

Evercore ISI is telling clients to buy Nvidia shares ahead of the company's upcoming earnings report, maintaining its Outperform rating and $261 price target in a note to investors Thursday. The firm anticipates a beat-and-raise quarter fueled by persistent demand for artificial intelligence chips and better-than-expected supply of next-generation processors.

"We expect another beat and raise quarter driven by strong demand and better GB200/GB300 supply," the analysts wrote, according to people familiar with the matter. The firm's bullish stance comes despite Nvidia's significant run-up this year, with the stock still appearing undervalued at current levels.

Nvidia's valuation remains compelling at just 30 times forward earnings with a PEG ratio of 0.55, the analysts noted, suggesting the market continues to underestimate the company's growth trajectory. The firm sees AI demand continuing to drive capacity directly, with rising cloud capital expenditure and a larger Blackwell/Rubin pipeline than Street estimates supporting further upside.

Recent financial performance supports the optimistic outlook. Nvidia's last quarterly report showed record revenue of $35.1 billion, representing 94% year-over-year growth, with data center revenue surging 112% to $30.8 billion. The company guided for $37.5 billion in revenue for the current quarter, a target that Evercore believes may prove conservative.

Multiple attempts to reach Nvidia representatives for comment on the Evercore note were unsuccessful Thursday afternoon. Trading activity in Nvidia options showed increased bullish positioning ahead of the earnings report, with heavy volume in out-of-the-money calls suggesting some investors are positioning for a significant move higher.

The firm's confidence in improved supply for the GB200 and GB300 systems addresses one of the key concerns that has weighed on investor sentiment in recent months. Production constraints have limited Nvidia's ability to meet overwhelming demand for its AI accelerators, particularly from cloud service providers and large enterprises building out AI infrastructure.

Nvidia shares were trading slightly higher in afternoon trading Thursday, continuing their remarkable run that has seen the stock more than double year-to-date. The company is scheduled to report earnings next week, with Wall Street watching closely for updates on the Blackwell architecture rollout and customer adoption trends.

Correction: An earlier version of this article misstated the timing of Nvidia's earnings report. The company is scheduled to report next week.