Evercore lifts Nvidia target on OpenAI deal, reaffirms stock as top pick

Nvidia has strengthened its position as a dominant AI infrastructure provider through a strategic alliance with OpenAI, involving up to a $100 billion investment to supply 10 gigawatts of data center chips and related solutions. Evercore reaffirmed Nvidia as its top pick, raising its price target to $225, projecting the deal will add $5.5 billion to Nvidia's H2 2026 revenue and prompting a 2% increase in its 2026 revenue and EPS forecasts. Analysts emphasize Nvidia's critical role as OpenAI's preferred supplier and its compelling valuation at 32x next twelve months' earnings, reiterating an "Outperform" rating despite broader AI capital expenditure concerns.

Analysis

Nvidia has solidified its critical role in the AI infrastructure buildout through a significant strategic alliance with OpenAI, which includes an investment of up to $100 billion to supply data center chips and hardware for a 10-gigawatt infrastructure project. According to analysis from Evercore, this partnership reinforces Nvidia's position as the preferred, scale solution provider for leading AI firms. The brokerage raised its price target on Nvidia to $225, estimating the deal will directly contribute $5.5 billion in revenue in the second half of 2026 and prompted a 2% increase to its 2026 revenue and EPS forecasts, which it notes may be conservative. The deal underscores the strength of Nvidia's full-stack solution, with its NVLink connectivity technology positioned to become a de facto industry standard alongside its CUDA software. While concerns about an AI capital expenditure bubble exist, Evercore argues the valuation remains compelling, with shares trading at 32 times next-twelve-months' earnings—below the nine-year median of 36 times. This partnership provides Nvidia with a significant, long-term revenue stream from a key customer, though it is noted that OpenAI continues to pursue its own chip development plans and its collaboration with Microsoft remains unaffected.

Key Decisions for Investors

• Investors should view this agreement as a material validation of Nvidia's long-term growth trajectory and revenue visibility, reinforcing a bullish thesis based on its entrenched position in the AI ecosystem.
• The stock's valuation at 32x forward earnings, below its historical median, suggests the current price may present a compelling risk/reward opportunity, despite broader market concerns about elevated AI-related capital expenditures.
• It is crucial to monitor the progress of in-house chip development by key customers like OpenAI, Google, and Amazon, as this represents the primary long-term competitive threat to Nvidia's market dominance.
• Consider the adoption of Nvidia's NVLink technology as a key performance indicator; its establishment as an industry standard would significantly strengthen the company's competitive moat beyond its GPU leadership.