Nvidia(NASDAQ: NVDA) was a $360 billion company at the start of 2023. In less than two years, its market capitalization ballooned to $3.5 trillion. Its ability to turn artificial intelligence (AI) into piles of cash is the driving force behind that incredible growth.
Nvidia's graphics processing units (GPUs) for data centers are the most popular in the world for developing AI, and demand continues to outstrip supply. That propelled the company's revenue to triple-digit percentage growth in each of the last five quarters.
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On Nov. 20, Nvidia will release a fresh batch of financial results for its fiscal 2025 third quarter (ended Oct. 31), and if past quarters are any indication, it could be an absolute blowout. Here's how I predict the stock will react once the results are announced.
Nvidia's new Blackwell chips will be in focus
Nvidia's flagship H100 GPU went into production in 2022, and it was the go-to choice for AI data center operators throughout 2023. GPUs are designed for parallel processing, so they can complete several tasks simultaneously with a very high throughput. They also have substantial amounts of built-in memory, which makes them ideal for training AI models and performing AI inference.
AI applications are forecast to drive a productivity boom across the globe, which could be worth up to $200 trillion in economic activity by 2030, according to Cathie Wood's ARK Investment. Tech giants like Microsoft and Amazon are filling their data centers with AI GPUs and renting the computing capacity to developers for a fee. It's a win for them, a win for Nvidia, and a win for the developers who don't have billions of dollars to spend on their own infrastructure.
Nvidia's H100 and the newer H200 are still in high demand, but the company's latest Blackwell architecture promises the biggest leap in performance so far. Blackwell-based GB200 GPU systems can perform AI inference at 30 times the pace of the equivalent H100 systems.
CEO Jensen Huang says individual GB200 GPUs will cost around $30,000 to $40,000, which is about the same price for the H100 when it first came out.
In other words, Blackwell will drive an incredible improvement in cost efficiency, which will make the most-advanced large language models (LLMs) more financially accessible to a wider group of developers and businesses.
GB200 shipments have already begun and will ramp up next year. One estimate suggests Nvidia is on track to ship up to 200,000 individual GB200 GPUs in the final three months of 2024, and we already know Microsoft is currently offering the new GPU to developers. Since Nvidia's fiscal 2025 third quarter includes October, its upcoming report might include billions of dollars in GB200 sales.
Image source: Nvidia.
What Wall Street expects from Nvidia's upcoming report
The company generated a record $30 billion in total revenue during the fiscal 2025 second quarter (ended July 28), which was a 122% increase from the year-ago period. That crushed Wall Street's forecast of $28.7 billion. The result included $26.3 billion in data center revenue alone, which represented 154% growth thanks primarily to GPU sales.
The chipmaker also generated a strong result on the bottom line with $0.68 in earnings per share (EPS). It was a 152% increase, and comfortably above Wall Street's estimate of $0.64 per share.
Wall Street also underestimated Nvidia's guidance for the third quarter. The company told investors it expects to deliver $32.5 billion in total revenue, whereas the Street had the number pegged at $31.7 billion.
Analysts have since revised their estimates higher to $32.9 billion (according to the consensus provided by Yahoo), which now signals that management's own forecast might be too conservative. We'll know for sure on Nov. 20.
Nvidia stock could soar with help from its Q3 results
The performance of a stock on any given day is just noise, but it's worth noting Nvidia stock actually fell by around 6% the day after it reported its second-quarter results in August. However, it has since gained 24% (as of this writing) and now trades at a record high.
The stock has soared almost tenfold since the start of last year alone, so the long-term trend is crystal clear. If the company exceeds Wall Street's revenue estimate of $32.9 billion in its upcoming third-quarter report, I would expect the stock to continue moving higher in the weeks and months ahead.
Its valuation also supports upside in the medium term. Wall Street expects the company to generate $4.06 in EPS in fiscal 2026 (which begins in February 2025), which places the stock at a forward price-to-earnings ratio (P/E) of 35.8. That means the stock will have to rise by 90% over the next year or so just to maintain its current P/E of 68.1.
A P/E of 68.1 isn't cheap relative to the market (the Nasdaq-100 trades at a P/E of 31.8), but Nvidia traded at an average P/E of 58.4 over the last 10 years -- and most of that period didn't even include the incredible tailwind from AI. Therefore, strong upside is definitely on the table in the coming year as long as the company meets Wall Street's earnings estimate:
NVDA PE Ratio Chart
Microsoft just told investors it had $20 billion in capital expenditures (capex) during its fiscal 2025 first quarter (ended Sept. 30), most of which went toward data center infrastructure and AI chips. That followed $55.7 billion in capex spending in fiscal 2024. Since Microsoft is rumored to be the biggest buyer of Blackwell chips right now, that bodes very well for Nvidia's financial results.
But Microsoft isn't alone. Amazon is on track to spend over $75 billion on AI capex this calendar year, and Meta Platforms will spend up to $40 billion, with even more money earmarked for 2025. The demand trajectory for Nvidia's GPUs is crystal clear, and that should support strong revenue and earnings growth for the foreseeable future.
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