Morgan Stanley pointed out that it is reasonable that market expectations have risen before Nvidia's earnings report. The bank expects Nvidia's second-quarter results, as well as the guidance provided, to be strong. However, Morgan Stanley added that its optimism for Nvidia is more focused on the future. The bank said that while demand continues to improve, supply remains a constraining factor, and the revenue forecast for Nvidia depends on the speed of mass production of Blackwell chips. The bank expects that Nvidia's third-quarter revenue will benefit from accelerated shipments of Blackwell chips.
Morgan Stanley raised its second-quarter revenue forecast for Nvidia to $46.6 billion from the previous $45.2 billion, and its third-quarter revenue forecast to $52.5 billion from the previous $51.3 billion; The full-year revenue forecast for fiscal 2026 was raised to $273.2 billion from the previous $264.6 billion, and the Non-GAAP earnings per share forecast was raised to $6.51 from the previous $6.28.
Morgan Stanley pointed out that on the demand side, Nvidia's customers used "amazing", "unsatisfactory" and "huge" to describe demand in earnings calls. The tone of comments from hyperscale customers has changed: late last year mainly emphasized supply constraints, and now more emphasis is placed on inferential demand surges, with capacity deployment struggling to keep up. This is a positive signal for Nvidia's revenue growth sustainability, even as Blackwell chips begin to ship on a large scale.
The increase in demand was mainly from Nvidia's four largest hyperscale customers. In addition, the needs of second-tier cloud service providers and sovereign customers are also easily underestimated forces. For example,CoreWeaveThe majority of capital expenditure is concentrated in the second half of the year, and about 50% will occur in the fourth quarter. Nvidia's customer base is expanding, and strong demand is no longer confined to head customers.
On the supply side, several factors are improving. Rack assembly accelerates, and Hon Hai expects rack shipments to triple quarter-on-quarter in the third quarter. DamoGreater ChinaThe hardware team expects the top four ODMs to double rack shipments in the third quarter. It is estimated that 34,000 racks will be shipped for the whole year, corresponding to about 2.4 million GPUs, which means about $90 billion in revenue for Nvidia. And this only includes the top four ODMs, excluding other partners.
Bottlenecks in the testing process are also easing. Advantest testing machines have shortened lead times, helping to restore normalization of test times. Morgan Stanley analyst Charlie Chan expects that the test volume of B200/B300 chips will increase from 1 million in the second quarter to 1.5 million in the third quarter. However, the forecast of the analyst who published this research report is relatively conservative, predicting that the test volume of B200/B300 chips will reach 1.2 million by the third quarter and 1.42 million by the fourth quarter.
Morgan Stanley added that in the second quarter, supply was not just about Blackwell chips. For now, production of Hopper chips has been halted, and although demand for these GPUs remains strong, it's hard to tell if there will be any new purchases in July. The bank forecasts second-quarter revenue for Hopper chips to decline 50% quarter-over-quarter to around $2.8 billion. Additionally, increased shipments of B200 servers made up some of the gap. On the whole, the increase of rack shipment ratio and the introduction of B300 may bring slight benefits.
It is worth mentioning that in the Chinese market, Morgan Stanley expects that the third quarter performance guidance given by Nvidia will assume minimal contribution from the Chinese market. If license approvals are accelerated, there is upside in revenue from the Chinese market, but there is still uncertainty about whether China's hyperscale customers can eventually buy H20 chips.
Morgan Stanley said that three months ago, the bank's expectation of Nvidia's demand and supply improvement was more optimistic than that of the market. Although the market expectation has been raised, the bank is still optimistic that Nvidia will continue to increase its market share in 2025 and maintain a market share of about 85% in 2026 to resist the market share from the ASIC field andAMD(AMD.US).
According to Morgan Stanley, Nvidia's share has increased significantly this year. Even the largest users of ASIC (such as Google) are expected to increase their spending on Nvidia by more than three times, while their spending on ASIC is only slightly increased. With Nvidia's R&D investment exceeding $15 billion and expanding to rack interconnection, software and services, it is 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 connected technology UALink will only be launched later, when Nvidia has turned to the next generation of NVlink Rubin and provided it to customers with NVlink convergence technology. Therefore, although there are windows for low-cost alternatives, the performance gap is still the biggest obstacle to competition.
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