How 'Explosive' Demand Could Drive Nvidia Stock Higher

Semiconductor giant Nvidia (NVDA) has encountered significant market turbulence in 2025, with NVDA stock down approximately 27% from recent highs to trade around $110.71 per share. U.S.-China trade restrictions have resulted in a substantial $5.5 billion charge related to H20 chip export limitations and the loss of roughly 13% of revenue from Chinese markets. 

However, NVDA is up more than 4% today after a bullish note from Morgan Stanley analyst Joseph Moore, who dismissed concerns about an AI digestion phase as "laughable," and projected strong growth through 2026 driven by "explosive" inference demand. 

Morgan Stanley Stays Bullish on NVDA Stock

“In the last four weeks as investor sentiment is worsening based on macro and supply chain risks, core demand for GPUs has shot higher amid a shortage of inference chips across most of the relevant [large language models], in all geographies,” wrote Moore in a Friday note. “While Wall Street is wringing its hands over a laundry list of very real concerns, Silicon Valley focus has shifted to a very different challenge—growth in tokens generated of (by some accounts) more than 5x since the beginning of the year is very much straining the ecosystem, and is driving a surge in investment to handle those workloads.”

The analyst raised his fiscal year 2027 estimates to $255.5 billion in revenue and adjusted EPS of $6.01, up from his prior forecast of $230.9 billion and $5.37 per share. Moore left his estimates for calendar year 2025 (fiscal 2026) unchanged due to H20 restrictions, but noted that “published concerns about China having stockpiled H20s seem inaccurate.”

Wall Street maintains a predominantly bullish outlook on Nvidia, with a “Strong Buy” consensus and an average price target around $168, suggesting a potential 64% upside from current levels. 

The Fundamental Case for Nvidia Right Now

The company's competitive position remains formidable, with former Intel (INTC) CEO Pat Gelsinger noting that competitors would need to be "10x better" to challenge Nvidia's market leadership, particularly given its 95% market share in machine learning applications. The latest Blackwell architecture has demonstrated remarkable success, generating $11 billion in revenue last quarter in what CEO Jensen Huang described as the company's fastest product ramp in history.

However, emerging competition from Chinese firms like Huawei - which claims comparable performance to Nvidia's H100 with its Ascend 910C chip - presents a new challenge to the company's dominance. The ongoing development of the next-generation Vera Rubin chip for 2026 demonstrates Nvidia's commitment to innovation despite regulatory headwinds. 

Trading at approximately 24 times forward adjusted earnings, near its lowest valuation in two years, Nvidia stock appears to be pricing in much of the near-term China risk while maintaining long-term AI leadership potential.

The semiconductor company also continues to expand beyond hardware, forming strategic partnerships such as the collaboration with Cerence (CRNC) for in-vehicle AI platforms. While geopolitical uncertainties persist, Nvidia's strong fundamentals and dominant market position in AI chips suggest potential opportunities for long-term investors willing to weather near-term volatility.