Nvidia (NASDAQ: NVDA) provides the most powerful graphics processing chips (GPUs) for developing artificial intelligence (AI) models. The company has an impressive list of customers who are spending tons of money to fill their data centers with those chips as they battle for AI supremacy.
In fact, Nvidia CEO Jensen Huang believes that spending on AI infrastructure will exceed $1 trillion in the next five years, and that his company will likely be the biggest winner as it has a dominant market share in the GPU space.
In an interview with CNBC last week, Huang made a series of positive comments about Nvidia’s new Blackwell GPU architecture. Here’s why every investor in Nvidia stock should be excited.
Blackwell will be transformative for both Nvidia and AI developers
Last year, Nvidia’s H100 data center GPU set the benchmark for AI development. It is still in high demand, but it was replaced by the H200, which is capable of performing AI inference (ingesting live data into AI models to make predictions) twice as fast.
But Nvidia’s Blackwell architecture delivers a big leap in performance. The new Blackwell-based GB200 NVL72 system can perform AI inference at as much as 30 times the speed of the equivalent H100 system. Additionally, each individual GB200 GPU is expected to sell for between $30,000 and $40,000, which is close to what many data center operators originally paid for their H100 GPUs.
In other words, Blackwell goes one unbelievable improving cost efficiency. That’s very important because most AI developers rent data center computing capacity by the minute from tech giants such as Microsoft And Amazon. Blackwell will reduce the cost of deploying more powerful large language models (LLMs), making advanced AI applications affordable to a broader group of consumers and businesses.
During the second quarter of fiscal 2025 (ended July 28), Nvidia generated a record $26.3 billion in data center revenue, up 154% from the same period a year ago. The company – like most Wall Street analysts – expects data center revenue to continue to rise for the foreseeable future.
However, there are questions about how long tech giants can continue to spend so much money on their AI infrastructure. For example, Microsoft reported $55.7 billion in capital expenditures (capex) during fiscal year 2024 (ending June 30), much of which went to data centers and chips. The company plans to spend even more in the 2025 fiscal year. How sustainable is this level of investment in the technology sector?
According to Huang’s latest comments, that won’t happen anytime soon
In September, Oracle founder Larry Ellison told analysts about a dinner he attended Tesla CEO Elon Musk and Jensen Huang. He remembered Musk and himself begging Huang for more GPUs so they can bring their AI ambitions to life, but the chip giant simply can’t keep up with demand.
In a CNBC interview last week, Huang said, “Blackwell is in full production, Blackwell is going as planned and the demand for Blackwell is insane.”
He also said, “Everyone wants to have the most, and everyone wants to be first” when it comes to Blackwell, which really highlights the existence of an AI arms race in the tech industry.
In addition to Microsoft, Amazon is on track to invest more than $60 billion in investments by 2024, including AI-related investments. Alphabet will spend approximately $50 billion, and Metaplatforms plans to spend up to $40 billion. Oracle’s capex totaled $6.9 billion in fiscal 2024 (ending May 31), and the plan is to double that number in the 2025 budget year.
If spending on AI infrastructure exceeds $1 trillion in the coming years, as Huang expects, then Nvidia’s data center revenues will likely have increased. years’ growth value still in the tank.
Nvidia shares are currently trading about 11% below their all-time high. Wall Street is forecasting earnings per share of $4.02 for the company’s fiscal 2026 (which begins in late January 2025), giving the stock a price-to-earnings (P/E) ratio of 31.8.
The Nasdaq-100 The technology index has a comparable price-to-earnings ratio of 29.8, so investors willing to hold Nvidia stock for at least the next few years are buying in at an attractive price, despite the stock’s incredible rise since early 2023.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. Anthony Di Pizio has no positions in the stocks mentioned. The Motley Fool holds positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, Oracle and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.
Jensen Huang just delivered some incredible news for Nvidia Stock Investors, originally published by The Motley Fool
