Data center capacity constraints could one day eat into Nvidia’s revenue potential, according to UBS analysts. What’s fueling Nvidia’s blockbuster gains is ongoing strong demand for artificial intelligence compute capacity, the firm said. But that could be more of a near-term catalyst for the stock, which has been riding a seemingly limitless high off the hype surrounding AI. UBS — and much of Wall Street — thinks Nvidia will deliver strong earnings on Wednesday. But the firm expects the chipmaker’s next 12 months price-to-earnings multiple will be “at the low end” of where it has historically traded due to concerns around “data-center capacity,” analysts Timothy Arcuri and Carlos Colorado wrote in a note last Tuesday. “A major factor that we believe will probably start coming into play is data center capacity — which we do think starts to hurt revenue, albeit maybe more in 2026 than in 2025,” Arcuri said, in a separate report. Despite some of its longer-term reservations, UBS maintained its buy rating and increased its price target on Nvidia by $270 to $850, which implies roughly 17 % upside from Friday’s close — one of the most bullish expectations on the stock. The firm is weighing its concerns against the fact that Nvidia’s demand continues to grow, even as lead times for its H100 80GB GPU have fallen to between three and four months from eight to 11 months, suggesting greater efficiency and immediate revenue. Nvidia’s H100 chip powers most of the large language models — think OpenAI’s ChatGPT, for example — and AI-related products from its tech hyperscaler clients, such as Microsoft and Amazon. “Nvidia’s lead times have come in substantially over the past few months, meaning shipment slots are still available in (the second half of 2024),” Arcuri and Colorado said. “Normally, this is bad, but demand for AI compute capacity is still so strong, in the near term, we think this just points to significant upside potential to shipments [and] revenue.” For the fourth quarter, UBS expects Nvidia to report data center revenue of $19.45 billion, which would entail sequential growth of 34%. That will help drive Nvidia’s total fourth-quarter revenue of $22.95 billion, the firm’s forecast. It also expects revenue and earnings per share, as well as data center revenue, to increase in 2025 and 2026. UBS’ estimates are higher than the Wall Street consensus. According to FactSet, average estimates for data center revenue are around $17.06 billion and $20.4 billion in total revenue for the fourth quarter. Nvidia’s growth has been fueled by relentless demand for its graphics processing units that are employed to train and run LLMs. During the fiscal third quarter, Nvidia had raked in $14.5 billion in revenue through its data center segment, which includes the sales of these GPUs. Half of this revenue came from cloud infrastructure providers such as Amazon , while the other half came from consumer internet entities and large companies, Nvidia said. Earlier last week, Nvidia surpassed Amazon in market capitalization to become the fourth-largest public company in the U.S., piling onto some investors’ concerns that the stock’s massive rally has led it to become overpriced . Nvidia has seen its share price soar roughly 250% over the past year, but the stock was down nearly 6% in trading Tuesday.