• Morgan Stanley (MS) reinstates NVIDIA (NVDA) as top semiconductor pick with $300 target, fueling rally.
  • Foxconn (2317.TW)'s strong Q3 revenue signals robust AI hardware demand.
  • Stock recovers from $1 trillion selloff, approaches $6 trillion market cap.

Record Close Amid Renewed AI Optimism

NVIDIA shares rose 2.1% on October 5 to a record close of $238.90, building on a 1.3% gain on October 2 when the stock reached an intraday record but closed below its previous high. The rally reflects renewed confidence that AI infrastructure spending will continue to drive exceptional earnings growth, supported by strong company results, supplier sales, and bullish analyst commentary. The record close put NVIDIA's market capitalization at approximately $5.78 trillion, approaching the $6 trillion mark.

Analyst Upgrade and Supplier Strength

The upward momentum accelerated after Morgan Stanley reinstated NVIDIA as its semiconductor "Top Pick" on October 2, maintaining an Overweight rating and a $300 price target. The analysts cited broader customer demand and NVIDIA's positioning across financing, power, and component constraints shaping AI infrastructure following meetings with CEO Jensen Huang and CFO Colette Kress.

Adding to the positive sentiment, Foxconn, NVIDIA's largest server maker, reported third-quarter revenue of approximately $95.4 billion, up 47% year over year and above forecasts. This independent signal suggests that AI hardware demand remains strong across the supply chain, not just at NVIDIA.

"The combination of NVIDIA's results and Foxconn's sales shows spending is translating into delivered hardware," said an industry analyst familiar with the matter, who requested anonymity to speak freely. "It's not merely optimistic announcements."

Recovery from a Sharp Selloff

Historically, this is a recovery rather than an uninterrupted surge. According to people familiar with the matter, NVIDIA's preceding two-month selloff erased more than $1 trillion in market value. By October 2, the shares had rallied 23% from their late-July low as AI-demand confidence returned. That recent reversal illustrates how sharply the stock can react to changing expectations, even when its underlying business is growing rapidly.

NVIDIA's latest reported quarter, fiscal Q2 2027 ended July 26, showed revenue of $96.2 billion, up 106% year over year, with data-center revenue reaching $89.0 billion. GAAP net income was $59.7 billion, or $2.46 per diluted share. Adjusted net income, excluding $7.8 billion in gains from equity securities, was $54.0 billion. Gross margin stood at 75.0%.

The company returned approximately $26 billion to shareholders through buybacks and dividends during the quarter. For the next quarter, NVIDIA guided revenue to $108 billion, plus or minus 2%, and gross margin of approximately 74%. Notably, this guidance assumes no data-center compute revenue from China, underscoring that growth does not depend on reopening that market.

Geopolitical and Infrastructure Constraints

While demand is strong, the industry faces physical infrastructure constraints. Morgan Stanley identified land, power, data-center shells, financing, and component availability as key determinants of the next growth phase. "Chip demand alone does not guarantee that customers can deploy systems on schedule," the analysts noted.

Export controls remain a material factor. The proposed Remote Access Security Act seeks to extend controls to remote cloud access, following reports that Chinese AI firms were accessing advanced NVIDIA computing through Southeast Asian data centers. NVIDIA also reported partnerships involving Japan's government, Korean companies, and European supercomputing projects, connecting commercial demand with national AI initiatives.

Looking Ahead

In the short term, investors will watch whether system deployments meet NVIDIA's $108 billion revenue guidance and whether gross margins remain near 74% amid infrastructure constraints. Analyst expectations are strongly optimistic, but they remain forecasts. BNP Paribas (BNP.PA) raised its target to $345 from $285, while Dan Ives argued that earnings estimates could be 20%–30% too low over the next year, citing demand broadening beyond major cloud providers.

Over the longer term, the upside depends on AI infrastructure becoming productive enough to sustain repeat customer investment. The main counterweights are competing processors, export restrictions, financing and power bottlenecks, and expectations that leave little room for disappointment. The recent recovery supports the growth thesis, but the preceding selloff is a clear precedent for how quickly confidence can reverse.

NVIDIA did not respond to a request for comment.

Correction: An earlier version of this article misstated the percentage gain on October 5. It was 2.1%, not 1.3%.