Nvidia: The Market Is Crazy Not To Push The Stock Higher

Nvidia reported a double-beat quarter with revenue growth of 105.9% Y/Y and record EPS, surpassing guidance for the 13th straight time. It also issued first-ever FY28 revenue growth guidance of ~70%, citing supply constraints and materially above consensus—an apparent catalyst for a major re-rating. While gross margin guidance steps down structurally due to HBM4 pass-through, the outlook remains supported by >60% net margins and >110% ROE, keeping forward valuation multiples described as undemanding.

Analysis

The market should focus less on the lower margin trajectory and more on the fact that the business is still converting extreme demand into a backlog-like revenue stream. In the next few days, the setup is for multiple expansion rather than estimate drift: when supply, not demand, is the bottleneck, the relevant question becomes how many quarters of revenue visibility the company can pre-commit, not whether gross margin is a few points lower. That usually keeps the stock supported even when headline profitability steps down.

Second-order winners are the constrained-capacity enablers: advanced packaging, HBM memory, and foundry/OSAT names tied to AI server buildouts. If NVIDIA is supply-limited at this scale, the pricing power partially migrates upstream, while direct GPU competitors face a tougher bar because they must win on ecosystem and availability at the same time. The flip side is that any delay in packaging or memory ramp can push revenue into later quarters, creating sharp but temporary sell-the-news reactions.

Contrarian risk: the consensus may be underestimating how much of the valuation case is now on revenue durability rather than earnings quality. If gross margin keeps resetting lower, the stock can trade more like a high-growth industrial than a software compounder, which caps multiple expansion even if fundamentals stay excellent. The key falsifier over the next 1-3 months is any slowdown in forward guidance cadence or evidence that supply constraints are starting to reflect demand saturation rather than merely limited capacity.

Key Decisions for Investors

• Buy NVDA on 2%-4% post-print weakness; 1-3 month target is a re-rating toward the upper end of mega-cap growth multiples, with downside limited if guidance remains supply-constrained.
• Pair trade: long NVDA / short AMD over the next 1-3 months to express the view that ecosystem lock-in and allocation priority matter more than incremental accelerator competition.
• Add a watchlist long in MU for the next 3-6 months: if HBM pass-through remains tight, memory pricing and mix should improve before end-demand decelerates.
• Take profits on any extension above the first post-guidance move if the market starts focusing on gross margin compression rather than revenue visibility; the thesis weakens if next-quarter margin guidance is cut more than expected.