NVDA Coils Under $134.50: Data Center Demand Inflection Incoming

Thesis

NVIDIA is entering a structural demand inflection in its data center segment that consensus estimates are materially underestimating. Q3 guidance implies a $4B incremental TAM shift driven by sovereign AI infrastructure spend and Blackwell ramp acceleration.

The technical picture reinforces this: NVDA has coiled under the $134.50 resistance cluster for six weeks on declining volume — a compression pattern that historically precedes directional resolution.

Key Data Points

• Data center revenue grew 427% YoY in Q2 FY2025 — the inflection is not speculative, it is in the numbers
• Hyperscaler capex guidance raised by 18% aggregate across META, MSFT, GOOG, AMZN in the last two quarters
• Blackwell supply constraints easing faster than Street estimates: lead times down from 52 weeks to 22 weeks as of latest channel checks
• Sovereign AI infrastructure spend (UAE, Saudi, India, Japan) represents a new demand vector not modeled in consensus

Gross Margin Dynamics

H200 ASPs are running 35–40% above H100 at equivalent capacity. TSMC wafer costs are incrementally higher but not proportionally so. The ASP expansion is flowing directly to gross margins — my model has NVDA GM at 78% for FY2025, vs Street consensus at 74.5%.

This 350bps GM delta matters: on $100B revenue, that is $3.5B incremental gross profit that consensus is missing.

Risk Factors

1. Export controls — Restrictions targeting China H20 could reduce total TAM by ~8%. Manageable, not thesis-breaking.
2. AMD MI300X — Gaining traction in inference workloads, not training. The moat is widest in training; watch inference share carefully.
3. Valuation — At 35x forward earnings, significant execution is priced in. A miss on gross margins is the key downside catalyst.

Position

Long NVDA. Target $185 within 12 months on base case. Stop on a weekly close below $118.