Nvidia’s AI-Powered Growth Spree Continues Unabated
A $3.5 Trillion Giant in the Making
Nvidia’s remarkable journey from a $360 billion company at the start of 2023 to its current market capitalization of $3.5 trillion is a testament to its unparalleled ability to monetize artificial intelligence (AI). The company’s graphics processing units (GPUs) for data centers have become the gold standard for developing AI, with demand consistently outstripping supply.
GPU Powerhouse
Nvidia’s flagship H100 GPU, which went into production in 2022, has been the go-to choice for AI data center operators throughout 2023. The H100’s parallel processing capabilities and substantial built-in memory make it ideal for training AI models and performing AI inference. As AI applications are forecast to drive a productivity boom worth up to $200 trillion in economic activity by 2030, Nvidia is poised to reap significant benefits.
Blackwell Architecture Revolution
The company’s latest Blackwell architecture promises a monumental leap in performance, with GB200 GPU systems capable of performing AI inference at 30 times the pace of equivalent H100 systems. This significant improvement in cost efficiency will make advanced large language models more financially accessible to a wider group of developers and businesses.
GB200 Shipments Take Off
GB200 shipments have already begun, with estimates suggesting Nvidia is on track to ship up to 200,000 individual GB200 GPUs in the final three months of 2024. Microsoft is currently offering the new GPU to developers, and with Nvidia’s fiscal 2025 third quarter including October, its upcoming report might include billions of dollars in GB200 sales.
Record-Breaking Revenue and Earnings
Nvidia generated a record $30 billion in total revenue during the fiscal 2025 second quarter, representing a 122% increase from the year-ago period. The company’s data center revenue alone reached $26.3 billion, a 154% growth driven primarily by GPU sales. Nvidia’s earnings per share (EPS) also surged 152% to $0.68, comfortably above Wall Street’s estimate.
Wall Street Underestimates Nvidia’s Guidance
Wall Street analysts have since revised their estimates higher to $32.9 billion, signaling that management’s own forecast might be too conservative. If Nvidia exceeds this revenue estimate in its upcoming third-quarter report, the stock is likely to continue moving higher in the weeks and months ahead.
Valuation Supports Upside
With a forward price-to-earnings ratio (P/E) of 35.8, Nvidia’s stock will need to rise by 90% over the next year or so just to maintain its current P/E of 68.1. Considering the company’s historical average P/E of 58.4 over the last 10 years, strong upside is definitely on the table in the coming year.
Microsoft’s AI Capex Bodes Well for Nvidia
Microsoft’s $20 billion in capital expenditures (capex) during its fiscal 2025 first quarter, primarily spent on data center infrastructure and AI chips, is a significant indicator of the demand trajectory for Nvidia’s GPUs. With other tech giants like Amazon and Meta Platforms also investing heavily in AI capex, Nvidia is poised to benefit from this trend.
The Future Looks Bright for Nvidia
As the demand for AI-powered technologies continues to grow, Nvidia’s GPU dominance is likely to drive strong revenue and earnings growth for the foreseeable future. With its valuation supporting upside, Nvidia’s stock is likely to continue its upward trajectory, making it an attractive investment opportunity for those looking to capitalize on the AI boom.
Leave a Reply