Morgan Stanley analyzes Nvidia (NVDA.US) "Balance Sheet as a Service": stock price target raised to $300, remains cautious on the credit side

According to news from Zhitong Finance APP, Morgan Stanley has released a research report evaluating Nvidia's (NVDA.US) "Balance Sheet-as-a-Service" from a cross-asset perspective. The report points out that Nvidia is increasingly utilizing its robust balance sheet to support AI infrastructure financing. Equity investments, prepayments, leasing, residual value support, unsold capacity, and revenue-sharing arrangements are becoming key mechanisms for financing the computing power ecosystem. As contingent exposures grow, more attention needs to be paid to credit risk.

The report's core views are divided into two parts: equities and credit. Morgan Stanley assigns Nvidia stock an "Overweight" rating with a target price of $300; on the credit side, it remains "Neutral/Sidelined," viewing tail risks as still early-stage, low in transparency, and large-scale, and chooses not to get involved for now.

Equity: "Overweight" Rating, Target Price $300

Morgan Stanley analyst Joseph Moore assigns Nvidia an "Overweight" rating with a $300 target. He believes that strong quarterly performance lays a more favorable foundation for future developments.

Specifically, Rubin has allowed Nvidia to regain control of the narrative. Compared to Grace Blackwell Ultra, Rubin offers a 30-fold increase in throughput per megawatt and a 35% reduction in token costs; the opportunity size per gigawatt has also increased from $18 billion with Hopper, to $25 billion with Blackwell, and $40 billion with Vera Rubin.

Management's comments on fiscal 2028 are also highly positive. The report notes that about 70% of fiscal 2028 revenue growth remains severely supply-constrained, with demand far exceeding that level. As Nvidia’s product line expands—including networking, Groq, and Vera—the company is able to capture higher value.

Gross margin reset has removed market concerns. The fiscal 2028 gross margin guidance is 72%-73%, roughly in line with Morgan Stanley’s expectations, primarily by passing on expensive storage costs while boosting gross profits. Supply commitments more than doubled to $279 billion, of which $179 billion covers most of the estimated $252 billion COGS for fiscal 2027-2028.

Revenue sharing has not yet been included in forecasts, which brings further upside potential. New cloud-related opportunities are still small but growing rapidly. Deploying just a few gigawatts could see double-digit EPS upward revisions by fiscal 2029, with limited downside risk.

Additionally, ecosystem investments and cash returns will persist. The annualized scale of dividends plus repurchases exceeded $100 billion this quarter, and is expected to grow roughly in concert with revenues next year. The report suggests that even if some cash is consumed to support the ecosystem, it still underpins the company’s value logic.

Credit: Maintain "Neutral/Sidelined", Tail Risks Remain Difficult to Assess

Morgan Stanley TMT credit research analyst Lindsay Tyler assigns Nvidia credit a "Neutral/Sidelined" rating. The report notes that exceptional growth is transforming Nvidia's balance sheet strength into a strategic AI financing tool, while also introducing new risks. Models and relative value indicators indicate conditions are acceptable, but tail risks remain early-stage, lacking transparency, and large in scale, so the firm chooses not to participate for now.

The report forecasts that by end-2028, Nvidia’s total credit exposure will expand to around $200 billion; about $170 billion of this is "contingent exposure," mainly divided into three parts:

1. Approximately $40 billion: Related to lease liabilities, including uninitiated commitments, partner lease guarantees, etc.;

2. Approximately $65 billion: Related to potential residual value support, to leverage over $500 billion in third-party capital. Nvidia may provide up to 25% residual value support in certain cases;

3. Approximately $65 billion: Related to new revenue-sharing/credit support models. This model may set a minimum revenue threshold, i.e., Nvidia only participates in sharing after cloud providers’ revenues from Nvidia GPUs exceed an agreed amount, which helps shorten customer contract lengths and extend financing terms.

Morgan Stanley notes that Nvidia’s credit spreads have improved, but still advises investors to remain patient. The report states that as an Aa1/AA-rated credit entity, Nvidia trades at seemingly wide spreads, but considering the at least $1 trillion scale and limited transparency of GPU/XPU-related innovation financing in the ecosystem, it is still too early to get involved. The firm maintains a "Neutral" stance on Nvidia’s credit, with the risk that contingent exposure could turn out lower than expected.