The Nvidia (NVDA) bulls continue to defend their favorite stock in the world heading into the chipmaker's earnings report next week.

Despite DeepSeek's challenge to thinking on AI costs, some analysts are staying upbeat on Nvidia. Though that comes with a few notes of caution — in particular, about a first quarter outlook that may not satisfy elevated market expectations.

"Near-term dynamics are fluid (January quarter to July quarter) … while long-term (October quarter and onward) our work suggests looks frankly spectacular," Loop Capital analyst Ananda Baruah said in a client note on Wednesday. 

Baruah reiterated a $175 price target on Nvidia, which assumes 25% upside from current levels. 

Added Baruah, "Big picture we believe that two to three year Street numbers remain low as our work with both customers and the Nvidia build ecosystem points we can see Nvidia GPU reaching 10 million to 12 million as hyperscalers look to increase their percentage on non-CPU compute to 50% plus in coming years (from ~10% currently). Remember … for Nvidia the story is accelerated compute + Gen AI, which means it is facing two $1.0 trillion compute market opportunities ahead of it in coming years, each of which is just at the very start."

Nvidia shares were up less than 1% in pre-market trading at $140 each.

While Nvidia shares have rallied back about 23% from the early February lows, sentiment on the company's fundamentals has become more mixed.

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Evercore analyst Mark Lipacis said in a recent note that there are three reasons for the more cautious tone: 1) DeepSeek lowering AI demand in aggregate, 2) DeepSeek shifting AI compute cycles away from Nvidia GPUs and to ASICs [custom chips], and 3) Blackwell chip delays.

China-based DeepSeek surprised markets in late January after unveiling RI, its AI model that gives a ChatGPT-esque performance at a cheaper price tag. RI cost a reported $5.6 million to build a base model, compared with the hundreds of millions of dollars incurred at US-based companies such as OpenAI and Anthropic.

Fears mounted instantly that US companies are overspending on AI infrastructure, which includes Nvidia chips.

"Conventional wisdom all of last year was that training amazing models was going to be possible for only a handful of companies," Snowflake (SNOW) CEO Sridhar Ramaswamy told me on Yahoo Finance's Opening Bid podcast. "What DeepSeek has done over the past few weeks is shatter that belief by saying they can train a model for $6 million."

The Street has nonetheless stuck with backing Nvidia in the run-up to its earnings report on Feb. 26, but with some caution about the near term.

"We expect a modest fourth quarter beat but the first quarter outlook could face headwinds from Blackwell transition, Hopper declines and China restrictions," BofA analyst Vivek Arya said in a note on Tuesday. "The stock could be volatile post results, but we expect positive momentum to resume as investors look forward to Nvidia's leading new product pipeline (GB300, Rubin) and total addressable market expansion into robotics and quantum technologies at upcoming GTC conference (March 17)."

Arya has one of the more aggressive price targets on Nvidia on the Street at $190.

To that end, Yahoo Finance data shows Nvidia's first quarter EPS trend has drifted modestly lower over the past 30 days. The Street has also not pushed up their 2025 EPS estimates on Nvidia for more than 60 days.

Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.

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