Morgan Stanley pointed out that market expectations had already risen before Nvidia's earnings report was released, which is reasonable. The bank expects Nvidia's second-quarter results and guidance to be strong. However, Morgan Stanley added that its optimism about Nvidia is more focused on the future. The bank stated that while demand continues to improve, supply remains a constraint, and its revenue forecast for Nvidia depends on the mass production speed of Blackwell chips. The bank expects Nvidia's third-quarter revenue to benefit from accelerated shipments of Blackwell chips.
Morgan Stanley raised its second-quarter revenue forecast for Nvidia to $46.6 billion from $45.2 billion, and its third-quarter revenue forecast to $52.5 billion from $51.3 billion. The full-year revenue forecast for fiscal year 2026 has been raised to $273.2 billion from $264.6 billion, and the Non-GAAP earnings per share forecast has been raised to $6.51 from $6.28.
Morgan Stanley pointed out that on the demand side, Nvidia's clients used terms like "astonishing," "insufficient," and "massive" to describe demand during the earnings call. The tone of comments from very large customers has changed: at the end of last year, the main emphasis was on supply constraints, but now there is more emphasis on inferring that demand has surged and capacity deployment is struggling to keep up. This is a positive sign for the sustainability of Nvidia's revenue growth, even as Blackwell chips begin to be shipped on a large scale.
The demand growth mainly comes from Nvidia's four major ultra-large customers. In addition, the demand from second-tier cloud service providers and sovereign customers is also an easily underestimated force. For example,CoreWeaveMost of the capital expenditures will be concentrated in the second half of the year, with about 50% occurring in the fourth quarter. Nvidia's customer base is expanding, and strong demand is no longer limited to top customers.
On the supply side, several factors are improving. Rack assembly is accelerating, and Foxconn expects rack shipments to triple in the third quarter compared to the previous quarter. Da MoGreater ChinaThe hardware team expects rack shipments from the top four ODMs to double in the third quarter. The company expects to ship 34,000 racks throughout the year, corresponding to approximately 2.4 million GPUs, which would mean approximately $90 billion in revenue for Nvidia. Moreover, this only includes the top four ODMs and does not include other partners.
The bottlenecks in the testing process are also easing. The reduced delivery cycle of the Advantest test machines helped restore normal test times. Morgan Stanley analyst Charlie Chan predicts that the number of B200/B300 chip tests will increase from 1 million in the second quarter to 1.5 million in the third quarter. However, the analysts who released this research report made relatively conservative predictions, predicting that testing of B200/B300 chips would reach 1.2 million units by the third quarter and 1.42 million units by the fourth quarter.
Morgan Stanley added that supply in the second quarter was not solely related to Blackwell chips. Currently, production of Hopper chips has ceased, and although demand for these GPUs remains strong, it is difficult to predict whether there will be new purchases in July. The bank predicts that Hopper Chip's second-quarter revenue will decline by 50% quarter-over-quarter to around $2.8 billion. In addition, increased shipments of B200 servers made up for part of the gap. Overall, the increased proportion of rack shipments and the introduction of the B300 may bring slight benefits.
It's worth noting that, regarding the Chinese market, Morgan Stanley predicts that Nvidia's third-quarter earnings guidance will assume minimal contribution from the Chinese market. If the license approval process is expedited, there is room for growth in revenue from the Chinese market, but it remains uncertain whether China's ultra-large customers will ultimately be able to purchase H20 chips.
Morgan Stanley stated that three months ago, its expectations for improved demand and supply for Nvidia were more optimistic than the market. Although market expectations have been raised, the bank remains optimistic that Nvidia will continue to increase its market share in 2025 and maintain a market share of approximately 85% in 2026, withstanding competition from the ASIC sector and...AMD(AMD.US) competition.
According to Morgan Stanley, Nvidia's market share has increased significantly this year, and even the largest ASIC users (such as Google) are expected to more than triple their spending on Nvidia, while spending on ASICs has only increased slightly. As Nvidia's R&D investment exceeds $15 billion and expands into areas such as rack interconnect, software, and services, it is becoming increasingly difficult for competitors to develop ASICs that surpass Nvidia in mainstream tasks. Although AMD plans to launch a rack-level solution in 2026, its connectivity technology, UALink, will not be available until later. By then, NVIDIA will have already moved to the next-generation NVlink Rubin and will be offering it to customers using NVlink fusion technology. Therefore, while there is a window of opportunity for low-priced alternatives, the performance gap remains the biggest obstacle to competition.
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