Nvidia(NASDAQ: NVDA) is the world’s leading supplier of graphics processing units (GPUs) for data centers, that are utilized in the event of artificial intelligence (AI). During the last two years alone, GPU sales have helped Nvidia add $3.2 trillion to its valuation.
The corporate just reported results for the fiscal 2025 third quarter (ended Oct. 27) after the market closed on Nov. 20, they usually obliterated Wall Street’s expectations. It just began shipping a recent generation of GPUs based on its powerful Blackwell architecture, and demand is heavily outstripping supply.
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Nevertheless, the stock sank 2.5% in after-hours trading following the third-quarter report. I predict shares are going to soar over the following 12 months, so here’s why any weakness may be a buying opportunity.
Image source: Nvidia.
Prior to now, data centers were built with central processing units (CPUs), which were great for handling a small variety of specific tasks with high efficiency. Nevertheless, GPUs are designed for parallel processing, meaning they’ll handle quite a few tasks at the identical time with a really high throughput.
That is crucial relating to training AI models and performing AI inference, because those workloads require chips that may rapidly absorb and process trillions of information points.
GPUs built on Nvidia’s Hopper architecture — just like the H100 and H200 — have been the go-to selection for AI development to date. Data center operators like Microsoft and Amazon buy tens of 1000’s of those GPUs and rent their computing power to businesses and AI developers, which might’t afford to construct their very own infrastructure (a single H100 can sell for as much as $40,000).
Now, a recent age of AI computing has arrived with Nvidia’s Blackwell GPU architecture. The Blackwell-based GB200 NVL72 system can perform AI inference 30 times faster than the equivalent H100 system.
A recent estimate suggests a person GB200 GPU inside an NVL72 system costs around $83,333, so developers are getting that 30-fold increase in AI inference performance for a mere twofold increase in price in comparison with the H100.
In other words, the Blackwell GPUs should drive an incredible increase in cost efficiency, so more businesses and developers can afford to deploy essentially the most advanced AI large language models (LLMs).
Nvidia shipped 13,000 Blackwell GPU samples to customers in the course of the third quarter. Microsoft, Dell, and CoreWeave have already began constructing Blackwell-based data centers, and Oracle customers will soon find a way to access computing clusters with a staggering 131,000 Blackwell GPUs.
Nvidia CEO Jensen Huang says Blackwell demand is “staggering.” GPU shipments could soar greater than 20-fold in the following few months alone, but I’ll discuss that further in a moment.
Coming into the third-quarter report, the consensus estimate amongst Wall Street analysts suggested Nvidia would deliver $33.2 billion in total revenue. The corporate blew that out of the water with $35.1 billion in sales, which was a 94% increase from the year-ago period.
The information center segment alone accounted for $30.8 billion of that total, which represented 112% growth. Nearly all of that cash was attributable to GPU sales.
The corporate also exceeded expectations with its guidance for the present fiscal 2025 fourth quarter (which can finish at the top of January). It told investors it plans to deliver $37.5 billion in total revenue, in comparison with Wall Street’s estimate of $37.1 billion.
Huang previously said he expected Blackwell GPUs to contribute “several billion dollars” in revenue in the course of the fourth quarter, but he now says the corporate is heading in the right direction to exceed that estimate, although he didn’t offer a selected dollar figure.
As I discussed earlier, the stock suffered a modest dip in after-hours trading following the discharge of its third-quarter report. That is surprising because the corporate beat expectations on every level. However the stock is up 202% this yr, so it’s possible some investors simply decided to take profits.
Let’s speak about valuation. Based on Nvidia’s trailing-12-month earnings per share of $2.62, its stock trades at a price-to-earnings ratio (P/E) of 54.2. That is actually a reduction to its average P/E of 58.6 during the last 10 years.
The necessary number is that Wall Street thinks Nvidia will generate $4.21 in earnings per share in fiscal 2026, which starts in a couple of months. That places it at a forward P/E of 33.8, which suggests its stock can have to soar 73% throughout next yr only for its P/E to trade in keeping with its 10-year average of 58.6.
For my part, Wall Street’s fiscal 2026 earnings estimate might actually be tooconservative! I discussed earlier that Nvidia shipped 13,000 Blackwell GPUs to customers in the course of the third quarter. Morgan Stanley says the corporate is heading in the right direction to ship as much as 300,000 units in the ultimate three months of calendar yr 2024, followed by as much as 800,000 units in the primary three months of 2025.
In other words, Blackwell shipments could surge by at the least 20-fold in Nvidia’s current fiscal 2025 fourth quarter in comparison with the third.
Plus, Morgan Stanley thinks Microsoft, Amazon, Alphabet, and Meta Platforms will spend a combined $300 billion on AI data center infrastructure next yr, with a good portion going toward GPUs. Those are only 4 of Nvidia’s top customers; OpenAI, Oracle, and even Tesla are also big spenders.
Due to this fact, I feel there may be a excellent likelihood that the stock delivers a gain of 73% or more next yr.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Idiot’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Idiot’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Idiot’s board of directors. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Idiot has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, Oracle, and Tesla. The Motley Idiot recommends the next options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Idiot has a disclosure policy.