Anticipation: Nvidia's Shares Likely to Skyrocket Post-Nov. 20 Due to These Uncomplicated Factors
Tech giant Nvidia (NVDA -1.68%) has become synonymous with AI investments for numerous investors. Since the launch of ChatGPT in late 2022, Nvidia shares have skyrocketed approximately 950%, making it the highest performing stock in the S&P 500 (^GSPC 0.38%).
On November 20, Nvidia will announce earnings for the third quarter of fiscal 2025, which concluded in October 2024. I anticipate a significant surge in the stock value within the following days and weeks for three key reasons. Delve deeper to discover more insights.
1. Nvidia may provide positive updates regarding its upcoming Blackwell GPUs
Nvidia creates the most sought-after graphics processing units (GPUs) in the tech industry, as they serve as the driving force behind enhancing AI workloads. In fact, Nvidia holds over 80% market share in AI accelerators, with Forrester Research stating, "Modern AI wouldn't exist without Nvidia GPUs."
Investors were informed last quarter that the production of Nvidia's next-generation Blackwell GPU would commence in the final fiscal quarter of 2025 (January 2025). During the third-quarter earnings call, management may provide updates on the Blackwell GPU progress. Shareholders are eagerly anticipating favorable news after CEO Jensen Huang declared Blackwell would be the company's most successful product launch ever.
Furthermore, Nvidia executives recently informed analysts that Blackwell GPUs are already "sold out for 12 months." This high demand for the new GPUs means Nvidia will likely offer optimistic guidance on November 20, which should fuel stock growth.
2. Wall Street analysts have increased their earnings estimates
Nvidia has provided optimistic third-quarter guidance, predicting a 80% revenue increase to $32.5 billion, coupled with an 80% increase in non-GAAP earnings to $0.72 per diluted share. Despite this, Wall Street analysts have consistently raised their third-quarter earnings estimates since the initial announcement.
The revised consensus now projects a 85% earnings increase to $0.74 per diluted share. Analysts have also boosted their target prices, implying a potential 10% increase from the current share price of $142. Analysts' insights, albeit not omniscient, are valuable as they have more resources than individual investors. Their growing optimism suggests thorough research has revealed strong demand, which could drive stock growth post-November 20.
3. Nvidia's prominent customers anticipate increased capital expenditures
All major hyperscale cloud computing companies are among Nvidia's customers, including Alphabet, Amazon, Meta Platforms, and Microsoft. These companies have invested heavily in AI infrastructure throughout 2024, and they expect capital expenditures to surge in 2025.
- Alphabet's capital expenditures amounted to $13 billion in the third quarter, primarily for infrastructure. CFO Anat Ashkenazi mentioned, "We do foresee an increase coming in 2025."
- Amazon expects capital expenditures to total about $75 billion in 2024, primarily for its cloud computing business. But CEO Andy Jassy pointed out, "I assume we'll spend more on that in 2025."
- Meta Platforms' capital expenditures will amount to about $40 billion in 2024, predominantly for AI servers. But CFO Susan Li noted, "We expect a significant increase in infrastructure expense growth next year."
- Microsoft's capital expenditures totaled $20 billion in the first quarter of fiscal 2025, which ended in October 2024. CFO Amy Hood mentioned, "We expect capital expenditures to increase sequentially due to our cloud and AI demand signals."
Some of the aforementioned spending reflects strong demand for Blackwell. However, Nvidia also produces central processing units (CPUs) and networking equipment. In fact, the company has effectively secured a leading position in AI networking gear, according to Bloomberg. The projected increase in capital expenditures further supports the idea that Nvidia will offer optimistic guidance during the third-quarter earnings report. This, in turn, could drive the stock higher post-November 20.
However, the crucial takeaway is Nvidia's competitive edge through vertical integration. As the company designs entire data centers, Nvidia can construct systems with a lower total cost of ownership. This edge should keep Nvidia ahead of its competitors in the coming quarters and years, as stated by Morgan Stanley analyst Joseph Moore: "The market often underestimates the difficulty of competing with Nvidia."
In light of the anticipated positive updates about the Blackwell GPUs and the high demand for these next-generation products, investors might consider increasing their investment in Nvidia stock. This potential surge in demand, coupled with the strong earnings estimates from Wall Street analysts, could lead to significant financial gains for those invested in Nvidia.
Furthermore, the prominent tech companies that are customers of Nvidia have announced plans to significantly increase their capital expenditures in 2025. With Nvidia's products, such as GPUs and CPUs, serving as crucial components of these companies' AI infrastructure, this increase in expenditures could translate into increased revenue and profits for Nvidia, further boosting its stock price.
