Nvidia(NASDAQ: NVDA) is the world’s largest provider of graphics processing units (GPUs) for data centers, which are used in the development of artificial intelligence (AI). In the past two years alone, GPU sales have helped Nvidia add $3.2 trillion to its valuation.
The company just reported results for the third quarter of fiscal 2025 (ending October 27) after the market closed on November 20, and they shattered Wall Street expectations. It has just started shipping a new generation of GPUs based on the powerful Blackwell architecture, and demand far exceeds supply.
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Still, the stock fell 2.5% in after-hours trading after the third-quarter report. I predict shares will rise over the next twelve months, so here’s why any weakness can be a buying opportunity.
Image source: Nvidia.
Historically, data centers were built with central processing units (CPUs), which were ideal for performing a small number of specific tasks with high efficiency. However, GPUs are designed for parallel processing, meaning they can run multiple tasks simultaneously at very high throughput.
That’s critical when it comes to training AI models and performing AI inference, because these workloads require chips that can quickly absorb and process trillions of data points.
GPUs built on Nvidia’s Hopper architecture – like the H100 and H200 – have been the best choice for AI development so far. Data center operators love Microsoft And Amazon buying tens of thousands of those GPUs and leasing their computing power to companies and AI developers who can’t afford to build their own infrastructure (a single H100 can sell for as much as $40,000).
Now a new era 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 that an individual GB200 GPU within an NVL72 system costs around $83,333, so developers get a 30-fold increase in AI inference performance for just a two-fold price increase compared to the H100.
In other words, the Blackwell GPUs should deliver an incredible increase in cost efficiency so that more companies and developers can afford to deploy the most advanced AI large language models (LLMs).
Nvidia shipped 13,000 Blackwell GPU samples to customers in the third quarter. Microsoft, Delland CoreWeave have already started building data centers in Blackwell, and Oracle customers will soon have access to computing clusters with as many as 131,000 Blackwell GPUs.
Nvidia CEO Jensen Huang says demand for Blackwell is “mind-boggling.” GPU shipments could increase more than twentyfold in the next few months alone, but I’ll get into that more in a moment.
In the third-quarter report, the consensus estimate among Wall Street analysts suggested that Nvidia would generate a total of $33.2 billion in revenue. The company blew that out of the water with revenue of $35.1 billion, which was a 94% increase from the same period last year.
The data center segment alone accounted for $30.8 billion of that total, representing 112% growth. Most of that money was attributable to GPU sales.
The company also exceeded expectations with its guidance for the current fourth quarter of 2025 (which will end at the end of January). It told investors it plans to generate a total of $37.5 billion in revenue, compared to Wall Street’s estimate of $37.1 billion.
Huang previously said he expected Blackwell’s GPUs to add “several billion dollars” to revenue in the fourth quarter, but he now says the company is on track to exceed that estimate, though he didn’t provide a specific dollar figure.
As I mentioned earlier, the stock saw a modest dip in after-hours trading following the release of its third-quarter report. That’s surprising because the company exceeded expectations on every level. But the stock is up 202% this year, so it’s possible some investors have simply decided to take profits.
Let’s talk about appreciation. Based on Nvidia’s trailing-twelve-month earnings per share of $2.62, the stock trades at a price-to-earnings (P/E) ratio of 54.2. That’s actually a discount on the average price-earnings ratio of 58.6 over the past ten years.
The important number is that Wall Street thinks Nvidia will generate earnings per share of $4.21 in fiscal 2026, which starts in a few months. That puts it at a forward price-to-earnings ratio of 33.8, meaning the stock will need to rise 73% next year just to bring the price-to-earnings ratio in line with the 10-year average of 58.6.
In my opinion, Wall Street’s earnings estimate for fiscal year 2026 might be just that atconservative! I mentioned earlier that Nvidia shipped 13,000 Blackwell GPUs to customers in the third quarter. Morgan Stanley says the company is on track to ship up to 300,000 units in the last three months of calendar year 2024, followed by up to 800,000 units in the first three months of 2025.
In other words, Blackwell shipments could jump at least 20-fold in Nvidia’s current fiscal fourth quarter of 2025 compared to the third quarter.
Furthermore, Morgan Stanley believes that Microsoft, Amazon, AlphabetAnd Metaplatforms will spend a combined $300 billion on AI data center infrastructure next year, with a significant portion of that going to GPUs. Those are just four of Nvidia’s top customers; OpenAI, Oracle or even Tesla are also big spenders.
Therefore, I think there is a very good chance that the stock will post a gain of 73% or more next year.
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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.
Prediction: Nvidia Stock Will Rise Over the Next Twelve Months, originally published by The Motley Fool
