This catalyst could be worth billions of dollars for Nvidia.
Nvidia (NVDA 2.18%) shares have roared higher over the past several years, thanks to the company’s dominance in the artificial intelligence (AI) chip market — it holds a more than 80% share. But recently, the stock has lost some of its momentum, falling more than 6% over the past month. Some investors have worried about growing competition in the chip market, and others fear that any slowdown in AI spending could hurt the company.
In my opinion, these concerns are overdone and Nvidia still has plenty of fuel in the tank to climb both in the near term and over time. My prediction is that one thing, in particular, will help Nvidia stock soar in the fourth quarter and the recent loss of momentum is only temporary. Let’s dive into this tech story that still has plenty of exciting chapters ahead.
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Nvidia’s path from gaming to AI
Just a few years ago, this technology giant’s biggest source of revenue was the gaming industry. Nvidia’s graphics processing units (GPUs) powered all of the action, due to their ability to handle multiple tasks simultaneously. It soon became clear that this profile made the GPU perfect for other uses, including AI.
Nvidia turned its attention to this high-growth field, and its earnings took off, climbing in the triple digits quarter after quarter. Today, Nvidia’s data center business — the one that serves AI customers — represents 87% of the company’s total quarterly revenue. That’s set to continue, considering the massive demand Nvidia’s seeing and the general growth forecasts for the AI market, which is expected to expand from $200 billion today to more than $1 trillion by 2030.
Of course, competitors do exist, but Nvidia is a step ahead when it comes to innovation. It also plans to update its GPUs on an annual basis, which should keep it in this top position. As for AI spending, my colleague Trevor Jennewine recently wrote about how spending on AI may gain more momentum over the coming years, representing great news for Nvidia.
Now let’s move on to my prediction. Yes, Nvidia shares have delivered a lackluster performance in recent weeks, but it’s important to put that into perspective. The stock still has advanced 144% so far this year and has soared 2,700% over the past five years.
“Several billion dollars” of new revenue
My prediction is that this is a pause in the action, and in the fourth quarter, sales of Nvidia’s new Blackwell architecture will help the stock roar higher. Nvidia said during its most recent earnings call that it plans to ramp up production of Blackwell in the fourth quarter and will record “several billion dollars” of revenue from it during that period.
Nvidia won’t report fiscal fourth-quarter earnings until early next year, but any communications from the company about the Blackwell release or talk in the market could happen much earlier — and investors are known to react to any news. All of this may equal strong performance for Nvidia shares in the fourth quarter of this year as investors consider the company’s message during the last earnings call — and look ahead to Blackwell’s contribution to the next fourth-quarter report.
It’s important to remember that Nvidia Chief Executive Officer (CEO) Jensen Huang said demand for Blackwell has surpassed supply, and he expects this to continue into the coming year, so it’s clear that customers are rushing to get in on this new platform. I recently wrote about how two major technology players begged Huang for more GPUs, further illustrating how eager customers are to get Nvidia chips.
All this makes me confident about Nvidia’s long-term revenue potential in the AI market and the potential for its shares to soar over time, as well — whether my near-term prediction is right or not. That means Nvidia still is a great stock to buy and hold for the long haul.
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.