Before Nvidia's earnings report, Citi shouted: Buy! AI demand far exceeds supply, and talk of a bubble doesn't hold up.

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As a frenzy of investment in the field of artificial intelligence (AI) sparks intense debate in the market over a potential bubble, Citigroup has cast a key vote of confidence for Nvidia.

According to "Chasing the Wind Trading Desk," Citigroup released a research report on November 10, maintaining its "Buy" rating on Nvidia stock, and raising its price target from $210 to $220. More notably, Citi has initiated a "30-day short-term bullish" view on the stock, betting that its earnings report, to be released on November 19, will deliver a strong performance through a “beat and raise” (revenue exceeding expectations and upward guidance revision).

This report directly addresses investor concerns about an “overheated” AI capital expenditure. Analysts Atif Malik and Papa Sylla noted in the report that, despite questions about the sources of AI investment funding, a more fundamental fact is that, due to advanced packaging (CoWoS) capacity limitations, the supply of AI chips will continue to fall short of demand until at least 2026.

Citigroup suggests Nvidia's stock remains attractive at current levels. The report states that Nvidia's current P/E ratio is about 28, which is more favorable compared to AI peers Broadcom at 38 and AMD at 37.

Outperformance Imminent?

Citigroup expects Nvidia’s upcoming financial results to easily surpass Wall Street’s consensus estimates. The report predicts that the company’s quarterly sales through October will reach $57 billion, higher than the market average expectation of about $55 billion.

Looking ahead, Citi expects Nvidia’s guidance for January quarter sales to reach $62 billion, again higher than the market expectation of about $61 billion.

The report points to the strong shipping momentum of Nvidia’s Blackwell architecture GPUs as the driving force behind this optimistic forecast. Citigroup analysts believe that Nvidia’s disclosure at the GTC Washington conference, where it revealed having shipped 6 million GPUs, is a strong signal that October and January quarterly results could exceed expectations.

Citi’s report states that its model assumes Nvidia’s data center sales will sequentially grow by 24% and 12% in the October and January quarters respectively, compared to market expectations of 19% and 15%.

AI Bubble Theory Refuted

In response to the increasingly heated “AI bubble” rhetoric in the market, Citi offered a sharply opposing view. The core argument of the report is that the main contradiction in the current AI chip market is insufficient supply, not lack of demand.

“Despite concerns regarding debt and circular refinancing portfolios around an AI capex bubble, we fundamentally see that, due to CoWoS capacity constraints, the supply of AI chips will fall short of demand through 2026, and may not catch up until some time in 2027.”

The report wrote. This judgment means that robust demand is real rather than a product of speculative hype.

To further substantiate strong demand, Citi points out that hyperscaler cloud revenues are inflecting upward starting from 2025, and are expected to accelerate further in 2026, with the key driver being the proliferation of enterprise-level AI applications.

Target Price Raised to $220

Based on its strong confidence in Nvidia’s growth prospects, Citi not only raised its price target but also comprehensively upgraded its financial forecasts. The new $220 target price is based on a forecast of Nvidia’s 2026 calendar year EPS of $7.24 and assigns a 30x P/E multiple.

The report shows that Citi raised its EPS forecasts for Nvidia’s fiscal years 2026, 2027, and 2028 by 2%, 7%, and 8%, respectively, to better match Citi’s revised global AI capex model. Notably, Citi continues to assume zero revenue from China data centers in its model, which means any policy easing could present additional upside.

Far from a Peak in the AI Chip Market?

Citi’s bullish perspective is not limited to Nvidia itself, but extends to the entire AI semiconductor market. The report significantly raises its forecast for future market size, suggesting the AI wave is far from cresting.

According to Citi’s latest model, by 2028 the size of the global data center semiconductor market (TAM) is expected to reach $654 billion, 16% higher than the previous forecast of $563 billion. The report explains that the main reason for the upward revision is “higher-than-expected demand from key AI players such as OpenAI.”

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