Nvidia (NASDAQ: NVDA) Shares have soared in recent years, thanks to the company’s dominance in the artificial intelligence (AI) chip market — it has a share of more than 80%. But the stock has lost some of its momentum recently, falling more than 6% in the past month. Some investors worry about growing competition in the chip market, and others fear that a slowdown in AI spending could hurt the company.
In my opinion, these concerns are overblown and Nvidia still has plenty of fuel left in the tank to rise both in the short term and over time. I predict that one thing in particular will send Nvidia stock higher in the fourth quarter and that the recent loss of momentum is only temporary. Let’s dive into this tech story that still has many exciting chapters ahead.
Nvidia’s path from gaming to AI
Just a few years ago, the tech giant’s biggest source of revenue was the gaming industry. Nvidia’s graphics processing units (GPUs) powered all the action, thanks to their ability to handle multiple tasks simultaneously. It quickly became apparent that this profile made the GPU ideal for other applications, including AI.
Nvidia turned its attention to this rapidly growing field, and its profits have soared, reaching triple digits each quarter. Today, Nvidia’s data center business, which serves AI customers, accounts for 87% of the company’s total quarterly revenue. That’s expected to continue, given the massive demand Nvidia is seeing and the overall growth expectations for the AI market, which is expected to grow from $200 billion today to more than $1 trillion by 2030.
Sure, there are competitors, but Nvidia is a step ahead when it comes to innovation. The company also plans to update its GPUs annually, which should keep it in this top spot. As for AI spending, my colleague Trevor Jennewine recently wrote about how AI spending could gain momentum in the coming years , which is great news for Nvidia.
Now let’s move on to my prediction. Yes, Nvidia stock has been a lackluster performer in recent weeks, but it’s important to put that into perspective. The stock is up 144% year to date and is up 2,700% over the past five years.
“Multi-billion dollars” in new revenue
I predict that this is a lull in the action, and that in the fourth quarter, sales of Nvidia’s new Blackwell architecture will drive the stock higher. Nvidia said during its most recent earnings call that it plans to ramp up production of Blackwell in the fourth quarter and that it will generate “several billion dollars” in revenue during that period.
Nvidia isn’t scheduled to report fiscal fourth-quarter earnings until early next year, but any communication from the company about Blackwell’s release or market talks could come much sooner — and investors have been known to react to any news. This could all lead to a strong performance for Nvidia stock in the fourth quarter of this year as investors weigh the company’s message during its last earnings call — and look ahead to Blackwell’s contribution in its next fourth-quarter report.
It’s important to remember that Nvidia Chief Executive Officer (CEO) Jensen Huang said that demand for Blackwell has outpaced supply and he expects that to continue into the year ahead. So it’s clear that customers are rushing to get on board with this new platform. I recently wrote about how two major tech players were begging Huang for more GPUs , illustrating just how eager customers are to get their hands on Nvidia chips.
All of this gives me confidence in Nvidia’s long-term revenue potential in the AI market and the potential for its stock to rise over time, whether or not my near-term prediction is correct. That means Nvidia is still a great stock to buy and hold for the long term.
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Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
Prediction: This One Thing Will Send Nvidia Stock Soaring in Q4 was originally published by The Motley Fool
