① Wells Fargo & Co analyst Aaron Rakers raised NVIDIA's target price from $265 to $315 and maintained an "Overweight" rating. ② Rakers developed a new model driven by gigawatt capacity to forecast NVIDIA’s data center revenue, projecting that its data center revenue will reach $354.5 billion in the fiscal year 2027.
Cailian Press, May 13 (Editor Huang Junzhi) $NVIDIA (NVDA.US)$ The first-quarter earnings report for the fiscal year 2027, ending April 26, is scheduled to be released after the U.S. stock market closes next Wednesday (May 20). Ahead of this earnings announcement, Aaron Rakers, an analyst at Wells Fargo & Co., expressed his optimistic expectations: he significantly raised NVIDIA's target price from $265 to $315 and maintained an 'Overweight' rating.
He noted that the chipmaker currently has a price-to-earnings ratio of 44.54 times, but its PEG ratio — the price-to-earnings ratio divided by the earnings growth rate — is only 0.63, indicating that the stock remains attractively valued relative to its growth prospects.
Rakers has been following NVIDIA for many years, and his performance ranks among the top 1% of Wall Street analysts. This time, however, the increase in the target price differs from previous ones, as Rakers relied on a new analytical framework he built from scratch. The latest target price implies that NVIDIA can rise by approximately 43% from Tuesday's closing price.
“Revenue driver”
It is reported that Rakers developed a new model driven by gigawatt capacity to predict NVIDIA's data center revenue. The model forecasts that the AI infrastructure capacity deployed by NVIDIA will gradually increase from 9.2 gigawatts in fiscal year 2026 to 15.7 gigawatts in fiscal year 2027, 20.8 gigawatts in fiscal year 2028, and 25.2 gigawatts in fiscal year 2029.
“Given all signs and comments pointing to a situation where computing demand exceeds supply, we believe the key factor driving NVIDIA’s data center revenue growth is the company’s ability to expand the deployment of gigawatt-scale AI infrastructure,” he stated in a report to clients.
The revenue projections derived from this model are quite impressive: Wells Fargo & Co currently expects NVIDIA's data center revenue to reach $354.5 billion in fiscal year 2027, $504.5 billion in fiscal year 2028, and $628 billion in fiscal year 2029. These figures are 4%, 11%, and 15% higher than market consensus estimates, respectively.
Meanwhile, Wells Fargo & Co also raised its revenue and earnings per share forecasts for fiscal years 2027 and 2028 to $378.9 billion and $8.45 per share, and $530.6 billion and $11.95 per share, respectively.
Rakers also mentioned Groq 3 LPX, a rack-level AI inference accelerator designed specifically for NVIDIA’s Vera Rubin supercomputing architecture, representing another growth point beyond the core data center business.
Why is it worth buying?
One of the most striking aspects of this report is Wells Fargo & Co's direct response to external bearish views on NVIDIA. Despite skeptics' concerns about NVIDIA’s market share and peak profit margins, Rakers believes that given NVIDIA’s relatively stable earnings outlook for 2027 and its forward price-to-earnings ratio being below 20 times, it is a stock worth purchasing.
He explained that NVIDIA’s median price-to-earnings ratio over the past three years (based on forward 12-month earnings) was approximately 32 times. However, despite the company currently holding a stronger competitive position and having a larger total addressable market than ever before, its price-to-earnings ratio based on 2027 projected earnings is below 20 times, significantly lower than its historical average.
Finally, ahead of the upcoming earnings report, Wells Fargo & Co raised its revenue and earnings per share forecasts for NVIDIA’s first quarter of fiscal year 2027 from $78.12 billion and $1.74 to $80.4 billion and $1.79, respectively, which are above market consensus.
Some analysts believe that the timing of Wells Fargo & Co’s report, released just days before NVIDIA announces its quarterly results, was chosen quite deliberately. Raising the target price before the earnings release indicates that analysts view the current situation as favorable for NVIDIA, and the upcoming results are likely to validate rather than challenge this revised model.
For investors focused on artificial intelligence semiconductors, this report further suggests that Wells Fargo & Co not only sees NVIDIA as a beneficiary of current AI infrastructure development but also as a foundational layer in AI construction for the coming years.
Editor/Rocky