This remarkable transition has led to a staggering 2,600% increase in NVIDIA’s stock price over the last five years, alongside consistent three-digit quarterly earnings growth. As the company gears up for its highly anticipated fourth quarter, here’s why NVIDIA is positioned for another leap forward.
AI Transformation: The Power Behind NVIDIA’s Surge
NVIDIA’s ascent in the AI sector didn’t happen overnight. While the company initially built a name with GPUs for the gaming industry, it soon saw potential in other industries, recognizing the power of its chips to process vast amounts of data across applications. With the development of CUDA, a parallel computing platform, NVIDIA expanded into new sectors, from healthcare to automotive, ultimately establishing a foothold in AI.
Today, NVIDIA’s GPUs have become essential in training AI models, giving the company a dominant role in the market. CEO Jensen Huang described NVIDIA as “the on-ramp to AI,” with major players like Meta Platforms and Amazon among its clientele. This dominance is evident in NVIDIA’s earnings as well, with AI-related revenue accounting for nearly 87% of the company’s total income.
As AI demand soars, NVIDIA’s chips are in high demand, even leading Oracle co-founder Larry Ellison and Tesla’s Elon Musk to seek out Huang to secure more GPUs. With the AI market projected to grow from $200 billion today to $1 trillion by the end of the decade, NVIDIA is positioned to capture a substantial slice of this growth.
Revenue Outlook for the Fourth Quarter: A Potential Blockbuster
Though NVIDIA expects a slight slowdown in growth for the third quarter, the fourth quarter is expected to be a blockbuster. One major reason: the introduction of NVIDIA’s new Blackwell architecture, including what is projected to be the company’s most powerful chip to date. The Blackwell series promises to set a new standard for AI computing, with demand already surpassing supply—a trend likely to extend well into the coming year.
NVIDIA plans to significantly ramp up production in the fourth quarter, aiming to generate billions in revenue from Blackwell alone. This quarter will mark the first revenue cycle for Blackwell, while demand for the current Hopper architecture also remains robust, meaning both platforms will likely contribute heavily to NVIDIA’s Q4 earnings.
Additionally, NVIDIA’s continued platform updates ensure that older products remain compatible with new technologies, providing customers with a comprehensive ecosystem that seamlessly integrates. This has led to sustained demand for its “older” products, bolstering the company’s revenue stream further.
Implications for Investors
NVIDIA’s stock has already seen significant gains, now trading at 49 times forward earnings—a high multiple that speaks to the market’s confidence in its growth story. Despite this premium, NVIDIA’s positioning as a leading AI provider and the anticipated success of the Blackwell launch suggest potential for further appreciation. The upcoming fourth quarter could mark a critical juncture in NVIDIA’s growth narrative, positioning the company for another phase of rapid expansion and possibly kicking off a new wave of returns for shareholders.
With Blackwell set to launch and NVIDIA’s ongoing dedication to innovation, the AI leader is poised for a stellar fourth quarter—one that could pave the way for even greater achievements in the years ahead.