Why Nvidia Stock Rallied (Again) on Tuesday

Shares of Nvidia (NASDAQ: NVDA) surged higher (again) on Tuesday, jumping as much as 4.9%. As of 3:32 p.m. ET, the stock was still up 4.6%.

The catalyst that sent the chipmaker and artificial intelligence (AI) specialist higher was a pair of price target increases by Wall Street analysts ahead of the company's upcoming quarterly report.

The bulls are running

Truist Securities analyst William Stein maintained a buy rating on Nvidia stock while increasing his price target to $167. For investors keeping score at home, that represents potential gains of 19% compared to Monday's closing price.

The analyst believes Nvidia is a buy ahead of its earnings, as he thinks there's still potential upside compared to Wall Street's current expectations. He cites increasing demand in the data center market, which is the repository for the vast majority of AI systems and models.

Not to be outdone, Stifel analyst Ruben Roy maintained a buy rating on Nvidia stock while increasing his price target to $180. This represents potential upside of 28% compared to Monday's closing price.

The analyst believes Nvidia will "beat and raise," beating Wall Street's consensus estimates for the quarter while also increasing its guidance for the full year. He points out that expectations have been rising ahead of Nvidia's fiscal 2025 third-quarter results, which will be released after the market close on Wednesday. He cites supply chain checks as supporting robust demand for Nvidia's soon-to-be-released Blackwell architecture.

A lot to prove

Nvidia dialed back expectations when the company issued its last quarterly report, but the results are expected to be robust nonetheless. For its fiscal 2025 third quarter (ended Sept. 29), the company guided for revenue of $32.5 billion, which would represent growth of 79%, with a corresponding uptick in profitability.

Investors will also be watching Nvidia's gross margin, which was slightly lower in Q2 after hitting a new record in the first quarter. Another area of interest will be progress regarding the company's upcoming Blackwell AI-centric processor release, which is expected to kick off later this year.

Nvidia stock is currently selling for 33 times next year's earnings, but I'd argue that's a small price to pay for a company that's widely considered the gold standard for AI processing.

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Danny Vena has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.