When UBS speaks on Nvidia, Wall Street listens. In a March 2 research note, UBS analyst Timothy Arcuri reiterated a Buy rating on Nvidia (NVDA) with a $245 price target. That is nearly 40% upside from where shares were trading at the time.
The call came after Arcuri met with Nvidia CFO Colette Kress during a UBS semiconductor bus tour. What he heard did not spook him. It made him more bullish.
Here is what is driving that confidence.
Nvidia just posted one of the biggest quarters in tech history
On Feb. 25, Nvidia reported record quarterly revenue of $68.1 billion for the fourth quarter of fiscal 2026. That is up 73% from a year earlier and up 20% from the prior quarter.
It beat Wall Street’s estimate of $66.2 billion by nearly $2 billion.
Data center revenue came in at $62.3 billion, up 75% year over year. Gross margins held firm at 75%. That last number matters. Skeptics have spent months predicting a margin squeeze from rivals like Google and Broadcom. It has not happened.
CEO Jensen Huang did not mince words on the earnings call. “Computing demand is growing exponentially,” he said. He argued that the agentic AI era has arrived and that compute has effectively become revenue for cloud providers.
The guidance is what really turned heads
Strong results are one thing. The guidance was another story entirely.
Nvidia projected $78 billion in revenue for Q1 fiscal 2027. Wall Street was expecting $72.6 billion. That is a massive beat on forward guidance, not just rear-view numbers.
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It was also the fourth consecutive quarter of accelerating growth. UBS noted that inventory purchase commitments nearly doubled quarter over quarter. A $100 billion quarterly revenue run is no longer a fantasy.
What drove the record quarter:
- Data center revenue of $62.3 billion, up 75% year over year, powered by the Blackwell GPU rollout across major cloud providers
- Networking revenue of nearly $11 billion in Q4 alone, up more than 3.5 times year over year as the Spectrum-X ethernet platform gains traction
- Sovereign AI revenue more than tripled to over $30 billion for the full fiscal year as governments build out national AI infrastructure
- Free cash flow of $35 billion in the quarter and $97 billion for the full fiscal year, giving Nvidia enormous room to invest and return capital
The networking business is what most investors are missing
This was Arcuri’s sharpest takeaway from his conversation with Kress. Most investors are fixated on Nvidia’s GPUs. UBS thinks the networking business is the sleeper story.
Nvidia’s Spectrum-X ethernet switches and BlueField processors are becoming the backbone of AI data centers. They are deeply embedded in customer infrastructure. That makes them very hard to rip out. UBS came away with greater confidence in this segment as a long-term profit driver.
Photo by NurPhoto on Getty Images
Networking revenue was up more than 263% year over year in Q4. That single segment is already on pace to become a multibillion-dollar business on its own, completely separate from GPU sales.
The risks are real and worth knowing
No honest bull case ignores the downside. Nvidia’s stock actually fell 5.5% the day after its blowout earnings. That erased roughly $260 billion in market value in a single session. High expectations have a cost.
China is also a real headwind. Export restrictions have cut off a once-meaningful revenue stream. In its own Q1 guidance statement, Nvidia said it is not assuming any data center compute revenue from China. Sovereign AI deals in the Middle East and India are filling some of that gap, but it is still a gap.
Related: History of Nvidia: Company timeline and facts
Key risks heading into GTC:
- China export restrictions remain a structural headwind with no near-term resolution in sight
- Custom chip programs from Google and Broadcom could gradually reduce hyperscaler dependence on Nvidia over time
- Valuation sits at roughly 47 times forward earnings, well above the S&P 500 average of 22 times
- Gaming revenue of $3.7 billion missed estimates of $4 billion as post-holiday inventory weighed on the segment
The GTC conference is the next big moment to watch
Nvidia’s GTC conference kicks off March 18. UBS and most bullish analysts see it as the next major stock catalyst.
Nvidia is expected to unveil its next-generation Rubin GPU architecture. Huang has said it could deliver up to a tenfold reduction in AI inference costs versus Blackwell. The company has already announced partnerships with AWS, Google Cloud, Microsoft Azure, and Oracle to deploy Rubin-based systems first.
UBS is far from a lone voice. Across 39 analyst ratings tracked by TipRanks, 37 recommend buying Nvidia. The average price target sits at $273.38. Morgan Stanley is at $260. RBC Capital is at $250.
The bottom line from UBS is straightforward. Hyperscalers are not pulling back. They are locking in 2027 compute buildouts right now. AI spending is not slowing down. It is accelerating. For Nvidia, the demand question is settled. The only question left is how fast supply can keep up.