The chipmaker is already a big winner, but investors may have overlooked a key detail hiding in plain sight.
The past few years have been nonstop thrills for Nvidia (NVDA -1.15%) investors. The company’s market capitalization was just $359 billion at the start of 2023, but its value has now skyrocketed to more than $3.35 trillion (as of this writing), a 9x increase in less than two years. It has increased more than that.
Driving this parabolic movement is the company’s graphics processing units (GPUs), which have quickly become the gold standard for powering artificial intelligence (AI). This has led to a 480% increase in revenue and a 1,270% increase in net income since the beginning of 2023.
Investors shouldn’t expect growth of this magnitude to continue, but there’s plenty of evidence that Nvidia still has plenty of gas left in its tank. Many of the world’s largest technology companies continue to invest heavily to upgrade their infrastructure to cope with the rigors of AI. And for most companies, that means stocking up on Nvidia’s cutting-edge processors.
Aside from the obvious long-term tailwinds, there’s an important detail investors may have overlooked that could make a big move for Nvidia in 2025. Read below to find out why.
Image source: Getty Images.
brief summary
Nvidia’s fiscal third quarter of 2025 (ended October 27) saw revenue of $35.1 billion, up 94% year-over-year, and adjusted earnings per share (EPS) of $0.81, up 103% . This result significantly exceeded management’s expectations, which called for a 79% revenue increase.
Management was clear on what fueled the impressive showing. “The age of AI is in full swing, driving the global transition to Nvidia computing,” said CEO Jensen Huang.
Taking a closer look at the results, revenue growth was driven by continued strong demand within Nvidia’s data center division, which increased 112% year-over-year to $30.8 billion. Much of that revenue comes from the company’s Hopper architecture, which is the basis for the H200 Tensor Core GPU and GH200 Grace Hopper superchip, which currently power many data centers and AI infrastructures around the world. .
These processors are currently the benchmark, but they are about to be replaced by Nvidia’s Blackwell architecture, which represents the next generation of AI-centric chips.
The company is working to ramp up production of its Blackwell processors, and previously said it expects to ship “billions of dollars” of these chips in the fourth quarter of fiscal 2025, which ends at the end of January.
Important details hidden in plain sight
Nvidia is completely oblivious to robust demand as big tech companies race to be among the first to receive these next-generation AI-centric chips. In an interview with CNBC, Hwang said the demand for Blackwell is “insane.” He continued, “Everyone wants to have the most, and everyone wants to be the best.”
Since everyone wants to get their hands on these chips, supply currently exceeds demand, and this situation is expected to resolve itself for a few quarters. “Demand for Blackwell has been phenomenal, and we are rushing to expand supply to meet this incredible demand,” Chief Financial Officer Colette Kress said in an earnings call. In her written commentary, she said (my emphasis) that “Both the Hopper and Blackwell systems have certain supply constraints, and Blackwell demand is expected to exceed supply for several quarters in fiscal 2026.” ” he added. By the way, Nvidia’s 2026 fiscal year begins in late January.
The resulting pent-up demand could serve as a springboard for Nvidia’s sales into next year.
I’m not the only one who thinks so. Beth Kindig, CEO and principal technology analyst at I/O Fund, believes that by 2025, Blackwell processor sales will exceed Nvidia GPU sales in 2023 and 2024 combined. Masu. Kindig said the company’s unbridled pricing power could drive at least 50% growth in the data center sector next year. This could lead to stock price increases of up to 70% in 2025.
scrape off old blocks
The race is to increase the availability of its flagship processors as Nvidia works with suppliers to scale up production. As the supply of these next-generation processors increases, the company’s revenue will also increase because the more they produce, the more chips they can sell. This would add to already strong profits and fuel the stock’s rise.
To be clear, we don’t know exactly when supply constraints will ease, but NVIDIA has a vested interest in resolving bottlenecks as quickly as possible. Management has historically been conservative with its estimates, so we can probably expect the supply of these top-end chips to increase over time, which will trigger Blackwell’s sales growth as the year progresses. Probably.
Some investors accept the fact that Nvidia’s growth has already peaked. I believe that view is premature and represents an opportunity for smart investors with a long-term view. That premium valuation is already starting to ease. Wall Street predicts the company’s fiscal 2026 EPS of $4.41, which is just 31 times next year’s sales (as of this writing).
Evidence suggests that at some point in 2025, supply of Nvidia’s top-of-the-line Blackwell AI chips will accelerate, and sales will increase accordingly. I predict that this will be a catalyst and the stock price will skyrocket in 2025.
