Despite intensifying competition, Nvidia is the high-tech industry’s graphics processing unit (GPU) of choice for creating and deploying generative AI software, accounting for 80% of the fast-growing artificial intelligence chip market.
When Nvidia reports third-quarter results on Wednesday, investors will want to watch whether the company can continue to grow at a breakneck pace even as the AI boom enters its third year. .
HSBC analyst Frank Lee wrote in a report this week that Nvidia is entering “uncharted territory” as it looks to continue growing with a market capitalization of $3.5 trillion.
“We have been pondering this incredible growth trajectory, and not only do we see no signs of slowing down, but we expect data center momentum to continue to pick up in 2026,” Lee said in the note. mentioned in. He rates the stock a buy.
Future growth should come from Blackwell’s next-generation chips, which have just begun shipping to end users, including: microsoft, google And OpenAI. More important than Nvidia’s third-quarter results will be what the company says about demand for its Blackwell chips.
Nvidia CEO Jensen Huang is likely to update investors on the situation on Wednesday, saying some systems based on Blackwell chips are experiencing overheating issues. There is also the possibility of dealing with reports.
Nvidia said in August that it expected Blackwell’s revenue to be about “billions” in the January quarter.
“Our base case is for NVDA to ship ~100,000 Blackwell GPUs in the fourth quarter, which we believe is near the lower end of investor expectations,” said Raymond James analyst Srini Pajjuri. he wrote in a memo last week. He has a strong “buy” rating on the stock.
Since Nvidia’s last earnings report, the stock has risen nearly 19%, capping an incredible rally that has seen the stock rise eightfold since the release of ChatGPT in late 2022. In parallel with the rise in stock prices, sales and profit margins also increased significantly. The company’s forward price-to-earnings ratio widened to below 50, according to FactSet.
Growth has slowed, in part because Nvidia’s revenue is much larger than it used to be. Nvidia reported a 122% increase in revenue in its most recent quarter. This was lower than the 262% year-over-year growth reported in the April quarter and the 265% growth in the January quarter.
Analysts surveyed by LSEG expect sales to be about $33.12 billion, which would represent nearly 83% year-over-year growth. The company is expected to post earnings of 75 cents per share, according to LSEG’s consensus estimate.
Nvidia’s data center business accounted for nearly 88% of its revenue in the most recent quarter, taking focus away from the company’s traditional computer gaming business.
For example, the company makes chips for the Nintendo Switch, but the Japanese video game company says sales have fallen sharply as the console ages. Nvidia’s gaming business is expected to grow about 6% to $3.03 billion, according to estimates from FactSet. The company’s automotive business, which makes chips for electric vehicles, remains small even though analysts expect sales to rise 38% to about $360 million.
But that doesn’t matter as long as NVIDIA’s data center business continues to grow at nearly twice the rate on an annual basis and Huang signals to investors that the party isn’t over.
