Morgan Stanley maintains NVIDIA Overweight/Top Pick, raises target price to $288

Overview

This is a Morgan Stanley earnings review on NVIDIA CORP. The report says the company's latest-quarter revenue, EPS, and guidance all came in better than expected, and future-year model forecasts were raised. The core view is that NVIDIA remains the most important AI chip supplier, and the Vera Rubin cycle will continue to demonstrate its leadership in AI factory economics and cost per token.

Core views

The report keeps NVIDIA as the semiconductor sector's Top Pick and believes the market has underreacted to the stock, creating an opportunity instead. Although investors worry about market share, index weight, supply-chain constraints, and competition from ASICs, TPUs, AMD, and others, Morgan Stanley argues that these comparisons often pit competitors' future products against NVIDIA's current products, while Vera Rubin may be broadly available before those rival chips. The report also argues that NVIDIA trades at about half the valuation of AI peers and below 17x next-year earnings, leaving the risk-reward compelling.

Analysis framework

The analysis focuses on the size of the earnings beat, next-quarter revenue and gross margin guidance, Morgan Stanley ModelWare forecast revisions, Vera Rubin product cadence, AI capex and data center demand, and relative valuation. The target price continues to use the prior method, calculated at roughly 22x Morgan Stanley ModelWare CY27 EPS estimate of $13.08.

Methodology notes

• Earnings forecast frameworkMorgan Stanley ModelWare

  ModelWare EPS and revenue forecasts

  The report notes that, unless otherwise specified, all metrics are based on the Morgan Stanley ModelWare framework, and FY27/FY28 revenue and non-GAAP EPS forecasts were raised accordingly.

• Valuation methodP/E multiple valuation

  Approx. 22x CY27 EPS

  The target price method remains unchanged, using roughly 22x Morgan Stanley ModelWare CY27 EPS estimate of $13.08 to derive the $288 target price.

• Risk-reward frameworkRisk Reward

  Bull/base/bear scenarios

  The report uses bull, base, and bear scenarios to discuss risk-reward factors such as data center revenue growth, AI software services, AI PCs, automotive opportunities, competition, tariffs, and export controls.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• NVIDIA CORP (US.NVDA)

  Core coverage asset

  Strengths

  AI chip and data center compute leader, with both results and guidance beating expectations; Vera Rubin is progressing on schedule, and purchase commitments plus gross margin guidance support short- to medium-term visibility into growth.

  Weaknesses

  A high market share and high gross margins limit room for further valuation multiple expansion in the near term, and index weight may also create a capital-allocation headwind.

  Comparison

  The report believes NVIDIA still trades at a discount to computing semiconductor peers such as AMD/AVGO/INTC, while its valuation is roughly half that of the broader AI peer group.

  Risks

  A slowdown in data center growth, competition from custom ASICs or customer in-house chips, tariffs and export controls, and lower AI development costs changing demand expectations.

Key data

• RatingOverweight / Top PickMorgan Stanley continues to keep NVIDIA as the semiconductor Top Pick.
• Target Price$288.00Raised from $285.00 to $288.00.
• Closing Price$223.47As of 2026-05-20.
• April-quarter Revenue$81.615bnUp 95.1% year over year and 19.8% quarter over quarter, above consensus of $78.907bn and Morgan Stanley's estimate of $79.264bn.
• Data Center Revenue$75.249bnUp 92.4% year over year and 20.8% quarter over quarter.
• non-GAAP EPS$1.87Above consensus of $1.75 and Morgan Stanley's estimate of $1.72.
• July-quarter Revenue Guidance$91bnMidpoint guidance above consensus of $87.293bn and Morgan Stanley's estimate of $87.880bn.
• Gross Margin Guidance75.0%Above consensus of 74.5%, viewed as a positive signal amid rising component prices.
• Purchase Commitments$119bnUp nearly $30bn from the prior quarter, with $95bn to be used for production over the next three quarters.
• Buybacks$80bnThe report also notes that the annualized dividend run rate rose to $1.

Impact & implications

If the report's view proves correct, NVIDIA's investment case will continue to be driven by AI data center demand, the next-generation GPU product cycle, system-level AI compute platforms, and its cost-per-token advantage. The modest target price increase reflects higher earnings estimates rather than a change in the valuation method; if the market continues to underestimate its AI hardware economics and Vera Rubin cadence, the stock still has room to rerate.

Risks

• Data center growth could slow materially if supply-demand dynamics change.
• A sharp decline in AI development costs could weaken demand for high-end GPUs.
• AMD MI455, TPU v8, ASICs, or customer-built hardware could intensify competition and market-share disputes.
• Tariff and export-control impacts could be worse than expected, especially for any recovery in revenue from regions such as China.
• High market share and high gross margins may limit further valuation multiple expansion.
• Morgan Stanley has a business relationship with the covered company, so research objectivity may face potential conflicts of interest.

What to watch

• Whether Vera Rubin is delivered on the 3Q schedule and becomes broadly available.
• Whether July-quarter revenue can meet the $91bn midpoint guidance and whether subsequent quarters continue to be revised up.
• Changes in data center revenue growth, hyperscale demand, and ACIE/edge growth rates.
• Whether the 75% gross margin level can be maintained despite rising component costs.
• The pace at which purchase commitments convert into actual revenue, especially the $95bn production usage over the next three quarters.
• Whether competing products such as ASICs, TPUs, and AMD GPUs demonstrate an empirical advantage in TCO and cost per token.
• China revenue recovery, export controls, and tariff impacts.