Nvidia(NASDAQ: NVDA) is the world’s main provider of graphics processing items (GPUs) for knowledge facilities, that are used within the improvement of synthetic intelligence (AI). Over the past two years alone, GPU gross sales have helped Nvidia add $3.2 trillion to its valuation.
The corporate simply reported outcomes for the fiscal 2025 third quarter (ended Oct. 27) after the market closed on Nov. 20, and so they obliterated Wall Road’s expectations. It simply began delivery a brand new technology of GPUs primarily based on its highly effective Blackwell structure, and demand is closely outstripping provide.
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Nonetheless, the inventory sank 2.5% in after-hours buying and selling following the third-quarter report. I predict shares are going to soar over the following 12 months, so this is why any weak spot could be a shopping for alternative.
Picture supply: Nvidia.
Previously, knowledge facilities had been constructed with central processing items (CPUs), which had been nice for dealing with a small variety of particular duties with excessive effectivity. Nonetheless, GPUs are designed for parallel processing, that means they will deal with quite a few duties on the identical time with a really excessive throughput.
That is essential relating to coaching AI fashions and performing AI inference, as a result of these workloads require chips that may quickly take up and course of trillions of information factors.
GPUs constructed on Nvidia’s Hopper structure — just like the H100 and H200 — have been the go-to selection for AI improvement thus far. Knowledge middle operators like Microsoft and Amazon purchase tens of hundreds of these GPUs and hire their computing energy to companies and AI builders, which might’t afford to construct their very own infrastructure (a single H100 can promote for as much as $40,000).
Now, a brand new age of AI computing has arrived with Nvidia’s Blackwell GPU structure. The Blackwell-based GB200 NVL72 system can carry out AI inference 30 occasions sooner than the equal H100 system.
A latest estimate suggests a person GB200 GPU inside an NVL72 system prices round $83,333, so builders are getting that 30-fold enhance in AI inference efficiency for a mere twofold enhance in worth in comparison with the H100.
In different phrases, the Blackwell GPUs ought to drive an unbelievable enhance in value effectivity, so extra companies and builders can afford to deploy probably the most superior AI massive language fashions (LLMs).
Nvidia shipped 13,000 Blackwell GPU samples to prospects throughout the third quarter. Microsoft, Dell, and CoreWeave have already began constructing Blackwell-based knowledge facilities, and Oracle prospects will quickly be capable of entry computing clusters with a staggering 131,000 Blackwell GPUs.
Nvidia CEO Jensen Huang says Blackwell demand is “staggering.” GPU shipments might soar greater than 20-fold within the subsequent few months alone, however I am going to focus on that additional in a second.
Coming into the third-quarter report, the consensus estimate amongst Wall Road analysts advised Nvidia would ship $33.2 billion in whole income. The corporate blew that out of the water with $35.1 billion in gross sales, which was a 94% enhance from the year-ago interval.
The information middle section alone accounted for $30.8 billion of that whole, which represented 112% progress. Nearly all of that cash was attributable to GPU gross sales.
The corporate additionally exceeded expectations with its steerage for the present fiscal 2025 fourth quarter (which can end on the finish of January). It instructed traders it plans to ship $37.5 billion in whole income, in comparison with Wall Road’s estimate of $37.1 billion.
Huang beforehand mentioned he anticipated Blackwell GPUs to contribute “a number of billion {dollars}” in income throughout the fourth quarter, however he now says the corporate is on observe to exceed that estimate, though he did not provide a selected greenback determine.
As I discussed earlier, the inventory suffered a modest dip in after-hours buying and selling following the discharge of its third-quarter report. That is shocking as a result of the corporate beat expectations on each degree. However the inventory is up 202% this yr, so it is doable some traders merely determined to take income.
Let’s speak about valuation. Based mostly on Nvidia’s trailing-12-month earnings per share of $2.62, its inventory trades at a price-to-earnings ratio (P/E) of 54.2. That is really a reduction to its common P/E of 58.6 over the past 10 years.
The essential quantity is that Wall Road thinks Nvidia will generate $4.21 in earnings per share in fiscal 2026, which begins in a couple of months. That locations it at a ahead P/E of 33.8, which implies its inventory must soar 73% all through subsequent yr only for its P/E to commerce according to its 10-year common of 58.6.
In my view, Wall Road’s fiscal 2026 earnings estimate may really be tooconservative! I discussed earlier that Nvidia shipped 13,000 Blackwell GPUs to prospects throughout the third quarter. Morgan Stanley says the corporate is on observe to ship as much as 300,000 items within the closing three months of calendar yr 2024, adopted by as much as 800,000 items within the first three months of 2025.
In different phrases, Blackwell shipments might surge by at the very least 20-fold in Nvidia’s present fiscal 2025 fourth quarter in comparison with the third.
Plus, Morgan Stanley thinks Microsoft, Amazon, Alphabet, and Meta Platforms will spend a mixed $300 billion on AI knowledge middle infrastructure subsequent yr, with a good portion going towards GPUs. These are solely 4 of Nvidia’s high prospects; OpenAI, Oracle, and even Tesla are additionally huge spenders.
Subsequently, I feel there’s a superb likelihood that the inventory delivers a acquire of 73% or extra subsequent yr.
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John Mackey, former CEO of Complete Meals Market, an Amazon subsidiary, is a member of The Motley Idiot’s board of administrators. Randi Zuckerberg, a former director of market improvement and spokeswoman for Fb and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Idiot’s board of administrators. Suzanne Frey, an government at Alphabet, is a member of The Motley Idiot’s board of administrators. Anthony Di Pizio has no place in any of the shares talked about. The Motley Idiot has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, Oracle, and Tesla. The Motley Idiot recommends the next choices: lengthy January 2026 $395 calls on Microsoft and quick January 2026 $405 calls on Microsoft. The Motley Idiot has a disclosure coverage.
Prediction: Nvidia Inventory Is Going to Soar Over the Subsequent 12 Months was initially printed by The Motley Idiot
