03:47 PM EDT, 08/29/2024 (MT Newswires) -- Nvidia's ( NVDA ) key indicators, including its purchase commitments and supply obligations, appear "bullish," potentially positioning the chipmaker for "very strong" sales growth over the next few quarters, UBS Securities said Thursday.

Late Wednesday, the company logged fiscal second-quarter results that exceeded Wall Street estimates as demand for generative artificial intelligence helped drive record revenue. Nvidia's ( NVDA ) inventory was $6.7 billion, while purchase commitments and obligations for inventory and manufacturing capacity were $27.8 billion, Chief Financial Officer Colette Kress said in comments posted on the company's website.

The company's purchase commitments and supply obligations, which historically have been "a harbinger" of future growth, increased notably for the first time in several quarters, UBS said. "Arguably, the most bullish sign of the print was (a roughly $10 billion) increase in what we consider to be its total supply," analyst Timothy Arcuri said in a note to clients. "We believe this foreshadows very strong revenue growth over the next few (quarters) -- starting with (the January quarter) as Blackwell will layer on top of Hopper."

In the fourth quarter, Nvidia ( NVDA ) expects to get "several billion dollars" in Blackwell revenue, Kress said on an earnings conference call late Wednesday. The company expects shipments of the Hopper graphics processing unit computing platform to rise in the second half of fiscal 2025, Kress added.

UBS said it sees Hopper volumes continuing to rise amid strong demand, eventually peaking in the fourth quarter. Nvidia ( NVDA ) expects full-year operating expenses to grow in the mid- to upper-40% range. This is "typically a bullish sign for future revenue visibility," Arcuri wrote.

The company expects software, software-as-a-service and support revenue to approach a $2 billion annual run rate exiting this year, Kress told analysts. "While still small, this is a key driver to open up new hardware markets, and we have previously suggested that we can easily see several ($10 billions) of such recurring revenue in the not too distant future," Arcuri said.

For the ongoing quarter, Nvidia ( NVDA ) projects consolidated revenue at $32.5 billion, plus or minus 2%. The outlook was above Street estimates but below a range of $33 billion to $34 billion projected by "many" investors, according to UBS.

The company's shares were down 5.5% in Thursday late-afternoon trade, but are up 140% so far this year.

"Given the progress of domestic offerings from Huawei and others, we do not see the US wanting to further constrain (Nvidia's ( NVDA )) ability to compete in China," Arcuri said. "We believe it is still too early to start discounting a peak as major (cloud service providers) are still indicating to us demand upside and lengthening duration of capacity commitments from their customers -- none of which suggests we are close yet to things rolling over."

The brokerage reiterated its buy rating and a $150 price target on the Nvidia ( NVDA ) stock.

The company said late Wednesday its board recently approved an additional $50 billion in share repurchase authorization, without expiration.

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