Citi Predicts NVIDIA Margins to Bottom Out in Q1 2025, Growth to Follow Blackwell Launch

Citi expects NVIDIA's gross margins to reach a low point of around 72% in Q1 2025, driven by the company's Blackwell architecture production ramp-up. The bank anticipates stabilization after the quarter, with margins returning to the mid-70s, signaling a positive outlook for future growth.

Citi Predicts NVIDIA Margins to Trough at 72% in Q1 2025, Recovery Expected with Blackwell

Citi has published a vital investment note on NVIDIA, emphasizing the company's immediate outlook and the anticipated trajectory of its margins as production of the Blackwell architecture increases.

In Q1 2025, Citi anticipates that NVIDIA's gross margins, which are presently experiencing pressure, will reach a low point in the low 70s, with a trough anticipated at approximately 72 percent. The bank expects that the Blackwell production will gather momentum after Q1, resulting in a stabilization in the mid-70s.

The financial institution additionally points out, "While we are bullish on another strong +40% Y/Y cloud data center capex growth next year, we expect the stock to likely remain range-bound through CES in January before Blackwell-driven year-over-year sales and gross margin inflection in the April quarter."

Citi perceives no imminent threat to NVIDIA's market dominance in the context of the GPU landscape's growing competition, particularly in light of the company's prominence in critical metrics like Total Cost of Ownership (TCO) and Return on Investment (ROI). According to Citi, data centers prefer NVIDIA's GPUs due to their adaptability across various applications, particularly those involving AI. This reduces the necessity of purchasing additional accelerators for more restricted use.

Citi Highlights NVIDIA's GPU Flexibility and Predicts Strong Demand for New GB200 Chip in 2025

According to Wccftech, Citi emphasizes the advantages of NVIDIA's GPUs in enabling enterprises to develop applications once and deploy them across various cloud platforms without rewriting them for specific operators. This capability enhances the appeal of NVIDIA's GPUs by providing substantial cost reductions and convenience. Additionally, NVIDIA's extensive installed base remains a compelling attraction for developers interested in reaching the broadest possible audience with their applications.

Citi anticipates that the new GB200 chip will significantly boost customer demand, thanks to its more favorable TCO and ROI than the 8-GPU format of the previous B100 in the Blackwell sales. This promising development underscores the potential for future growth in NVIDIA's market position.

In conclusion, Citi has maintained its Buy rating on NVIDIA and set a price target of $150 per share. The bank's outlook on the company is broadly positive, with the anticipated margin recovery, strong demand for GPUs, and the potential of the new GB200 chip all contributing to a reassuring financial outlook for investors.