Nvidia is poised to surge another 16% as signs point to 'exceedingly robust' demand for its next-gen Blackwell chip, UBS says

• UBS said Nvidia's eye-popping stock rally can continue to $150 per share.
• The bank said recent supply chain checks show "exceedingly robust" demand for Nvidia's next-gen chips.
• Nvidia's potential $5 EPS in 2025 would give it a valuation of 25.6x on a forward price-to-earnings basis.

Nvidia stock's eye-popping rally is poised to continue as it benefits from strong demand for its next-generation of artificial intelligence-enabling chips, according to UBS.

The bank raised its 12-month price target on Nvidia stock to $150 per share from $120 per share in a note on Monday, representing potential upside of 16% from current levels.

Based on recent supply chain checks, UBS analyst Timothy Arcuri said "demand momentum for Blackwell rack-scale systems remains exceedingly robust."

Blackwell is Nvidia's next-generation AI-enabled GPU system that will replace the incredibly popular H100 chip later this year. The chip is expected to deliver significant efficiency gains compared to the Hopper chipset, and the cloud hyperscalers are hungry for them.

"We now believe EPS of ~$5 could be doable for C2025 as the order pipeline for NVL72/36 systems is materially larger than just two months ago as hyperscaler budgets for C2025 firm up," Arcuri said.

If Nvidia does deliver on $5 in earnings per share next year, it would be trading at a forward price-to-earnings ratio of about 25.6x. Considering the company's fast growth rate, that would not be a demanding valuation given the S&P 500 trades at a 21x forward price-to-earnings multiple.

And that's the big disconnect between Arcuri's estimates and the rest of Wall Street.

Sell-side consensus estimates expect Nvidia to deliver earnings per share of $3.62 in 2025, which gives it a forward price-to-earnings multiple of 35x.

"Given all of this, we believe a $150 PT can be supported and we maintain our "Buy" rating as we roll our valuation basis forward from C2025 EPS to an average of C2025/C2026," Arcuri said.

Also boding well for more gains for Nvidia is the growing "wall of worry" surrounding the stock in recent weeks. That should ultimately power more gains as bearish concerns are converted to bullish outlooks amid solid earnings results.

"Sentiment on the stock - though still strong - has faded somewhat in recent weeks, creating more of a 'wall of worry' that should be ultimately healthy if our outlook materializes," Arcuri said.