Anticipation: This Particular Catalyst Could Enable Nvidia to Achieve a Feat Unprecedented by Any Other Corporation.
In a couple of short years, Nvidia (down by 2.69% as NVDA) has truly made its mark. Initially, the company was predominantly catering to the video gaming market with its processors and generating less than $5 billion in annual revenue. However, its rapid transformation saw it emerge as the undisputed leader in the artificial intelligence (AI) chip sector. This dominance has allowed Nvidia to rake in more revenue in a single quarter than it used to in an entire year. The recent three-month period saw revenue surge by 94% to an all-time high of over $35 billion.
In addition to this, Nvidia has also achieved other significant milestones. It joined the Dow Jones Industrial Average this year and managed to surpass Apple to claim the title of the world's most valuable company, boasting a value of over $3.5 trillion. Looking ahead, the question on everyone's mind is, what's next for Nvidia? I predict that one major factor will propel this AI powerhouse to accomplish something no other company has managed.
From video games to artificial intelligence
Let's first delve into Nvidia's journey so far. As you know, Nvidia had a strong focus on serving the video gaming market with its high-performance graphics processing units (GPUs). However, the GPU's ability to handle multiple tasks simultaneously made it versatile. Nvidia's creation of the CUDA parallel computing platform further facilitated this transition.
As the AI boom gained momentum, it became evident that Nvidia's GPUs would play a vital role in this high-growth sector. Nvidia completely embraced AI, not only customizing their GPUs to meet this new technology's needs but also offering a wide array of associated products and services. This strategy helped Nvidia secure over 80% market share in the AI chip market and position itself for long-term success.
Today, Nvidia is the go-to source for anyone aiming to develop an AI project. It boasts some of the world's largest technology companies as its major clients, including Meta Platforms and Microsoft. Moreover, Nvidia's offerings are available across all public clouds, making it easy for customers to tap into its AI capabilities.
This strategic positioning has led to consistent double-digit revenue growth for Nvidia's data center business and margins exceeding 70%. In other words, Nvidia not only wins when it comes to revenue growth but also when it comes to profitability.
Nvidia's stock performance has mirrored this success story, with shares skyrocketing by 2,600% over the past five years and set to increase by nearly 200% this year.
Nvidia's market value is set to rise
Now, let me share my prediction. I believe that a single catalyst is about to emerge, helping Nvidia achieve something no other company has managed: a $4 trillion market capitalization.
The catalyst? Nvidia's launch of its new Blackwell architecture and its most powerful chip ever. Nvidia has already shipped 13,000 Blackwell GPU samples to clients. Moreover, Microsoft and Oracle have recently showcased their Blackwell-powered racks on social media. Nvidia aims to ramp up production in the current quarter and generate billions of dollars in revenue from Blackwell during this period.
Furthermore, Nvidia has hinted at "crazy" demand for Blackwell, with the demand significantly outpacing the supply. This is expected to fuel growth for the company and please investors, potentially pushing the stock higher.
To reach a $4 trillion market cap, Nvidia's shares would need to increase by about 13% to $165 from their current price of around $146 as of the Nov. 21 market close. This is inherently possible, considering Nvidia's current valuation and growth prospects. Trading at 50 times forward earnings estimates, Nvidia may seem expensive, but it's reasonably priced for a high-growth player, providing ample room for growth. Nvidia forecasts fourth-quarter revenue growth of approximately 70%. And analysts predict annual earnings-per-share growth of 35% over the next five years.
In conclusion, high demand for Blackwell, along with Nvidia's current valuation, makes it plausible for this company to accomplish something no other company has: to surpass $4 trillion in value. Whether this happens soon or down the line, Nvidia, with its leadership, commitment to innovation, and growth prospects, remains a top long-term AI buy.
Given Nvidia's outstanding performance in the AI sector, investors are considering strategic opportunities for further growth. One such opportunity is the anticipated impact of Nvidia's upcoming Blackwell architecture and its most powerful chip yet. With Microsoft and Oracle publicly showcasing Blackwell-powered racks, there's high anticipation for the product's launch. If demand outpaces supply as predicted, this could propel Nvidia's revenue even higher and potentially push its stock price beyond its current $146, towards the $165 mark needed to reach a $4 trillion market capitalization. With Nvidia's current valuation and its robust growth prospects, achieving such a milestone may be within reach.
