11:44 AM EST, 11/21/2024 (MT Newswires) -- Nvidia ( NVDA ) gross margins are slightly lower in the short term, but they expected to recover during the peak of the Blackwell product ramp-up, Morgan Stanley said in a report Thursday.

"Blackwell ramp will put some [initial] pressure on [gross margins], but commentary for a potential return to the mid 70s in the second half of next year should ease concerns," Morgan Stanley said.

The Wall Street firm is optimistic about Nvidia ( NVDA ), citing the strong "AI cycle" and noting that its stock seems undervalued compared to other AI beneficiaries, despite semiconductor sector pressures, the report said, adding that this optimism is supported by high investor enthusiasm for the company's outlook in 2025.

Nvidia ( NVDA ) reported fiscal Q3 revenue of $35.08 billion, beating estimates, with strong growth across all segments, especially Data Center, and non-GAAP EPS of $0.81 exceeded expectations, the report said.

Morgan Stanley raised the company's fiscal-year 2026 revenue estimates to $185.7 billion and EPS to $4.21, up from $176.8 billion and $4.03, while fiscal-year 2025 revenue is now projected at $128.9 billion with EPS of $2.94, the report said.

Morgan Stanley has an overweight rating on Nvidia ( NVDA ) and raised its price target to $168 from $160.

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