Nvidia shares rose in premarket trading on Friday after Morgan Stanley reinstated the chipmaker as its top semiconductor pick.
The analysts said the company remains well positioned to benefit from the continued expansion of artificial intelligence infrastructure.
The NVDA stock was up 1.64% in premarket trading after Morgan Stanley analyst Joseph Moore said Nvidia was trading at a valuation that left room for further upside as earnings estimates continue to rise.
“We certainly see NVIDIA as well positioned, with a very undemanding valuation,” Moore wrote following investor meetings with Nvidia CEO Jensen Huang, CFO Colette Kress and investor relations head Toshiya Hari in New York and Boston.
Valuation leaves room for upside
Nvidia currently trades at about 15 times Morgan Stanley’s fiscal 2028 earnings estimate, according to Moore.
He said the valuation multiple could expand if investor enthusiasm for artificial intelligence returns, although such an expansion is not necessary for the stock to perform well as earnings expectations increase.
The bank also sees a shift in the main constraint facing the AI industry.
Rather than chip production, the bottleneck is increasingly becoming the pace at which new data center capacity can be constructed and financed.
That shift could benefit Nvidia, given the breadth of its cloud customer base and its ability to supply customers in markets where power availability is less constrained.
Nvidia lists 80 cloud partners globally, with 55 located outside the US, giving the company flexibility as AI infrastructure investment spreads across regions.
Moore also highlighted the diversity of Nvidia’s customer base beyond the largest technology companies.
“While 90% of investor conversations are around the biggest hyperscalers and frontier model companies, half of the business – probably the faster growing half – is a broader range of AI model companies, Neoclouds, sovereign entities, ODMs and OEMs, and enterprise customers,” Moore wrote.
Nvidia targets higher revenue from each gigawatt
Morgan Stanley also pointed to Nvidia’s strategy of increasing the amount of revenue generated from each unit of power used by AI infrastructure.
Morgan Stanley estimates Nvidia’s 2028 Feynman architecture could lift revenue per gigawatt from roughly $40 billion to well above $50 billion.
That could become increasingly important as data center operators face constraints around electricity generation, grid connections and available power.
Moore also expects the development of AI agents to increase demand for CPUs, but said the impact on GPU spending should be significantly larger.
Barclays sees $401 billion hyperscaler revenue in 2027
Nvidia’s cash generation has provided another source of support for the shares in recent days.
The company recently authorized an additional record $150 billion for share repurchases, taking its remaining buyback authorization to $235 billion.
Nvidia expects to deploy that authorization through fiscal 2028.
Nvidia received another boost on Thursday after Barclays analyst Tom O’Malley raised the potential for the chipmaker’s hyperscaler revenue.
Using what he described as “napkin math” based on Nvidia’s latest disclosures on information technology spending by major cloud providers, O’Malley estimated that Nvidia could generate $237 billion in hyperscaler revenue in 2026 and $401 billion in 2027.
Those figures compare with Barclays’ existing estimates of $206 billion and $370 billion, respectively.
In an upside scenario, Barclays sees hyperscaler revenue reaching $246 billion in 2026 and $417 billion in 2027.
O’Malley estimates Nvidia’s share of IT capital spending among the five largest cloud providers could reach 44% in 2027.
Barclays maintains an ‘Overweight’ rating on Nvidia with a $275 price target, while Cantor Fitzgerald analyst C J Muse has a Buy rating and a $350 price target.
Amazon explores asset-light Nvidia chip strategy
Meanwhile, Nvidia’s biggest customers are also looking at ways to manage the enormous capital requirements associated with AI infrastructure.
Amazon is seeking to transfer about $8 billion of Nvidia Grace Blackwell chips to outside investors through a new financing vehicle, according to the Financial Times report.
Amazon has reportedly held talks with investors about moving thousands of Grace Blackwell chips being installed in US data centers into a special-purpose vehicle.
The company would then lease the chips back from the vehicle, which would raise debt from outside investors.
The structure could allow Amazon to adopt a more asset-light approach by shifting ownership of the expensive semiconductors to investors while retaining access to the computing capacity.
Amazon plans to offer investors an equity stake of up to 10% in the vehicle, according to the report.
The proposed transaction highlights the scale of capital being committed to Nvidia’s AI infrastructure ecosystem, while also showing how cloud companies are exploring alternative financing structures as spending on advanced computing accelerates.
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