The past several quarters already have been pretty successful for Nvidia (NASDAQ: NVDA). The company has built an artificial intelligence (AI) empire thanks to its strengths in the technology customers need to fuel AI projects. Nvidia’s AI chips, or graphics processing units (GPUs), are the fastest around, and customers are flocking to the company for them — even if they have to wait due to demand outstripping supply.
All this has resulted in triple-digit earnings growth quarter after quarter and stock price gains of 2,600% over the past five years. Momentum hasn’t slowed this year, with the stock heading for a 185% increase.
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Though Nvidia forecasts double-digit revenue growth for the third quarter, I don’t see this as a slowdown. In fact, my prediction is the next period — the fourth quarter — will be huge for Nvidia. Let’s find out why.
First, a quick summary of the Nvidia story so far: The company has become almost synonymous with AI due to its dominance in the market, with sales to AI customers making up 87% of its total revenue. But this wasn’t always the case. Nvidia started off mainly serving the video game market with its GPUs. It soon became clear, though, that these chips — with the ability to process multiple tasks simultaneously — could be valuable in many other areas.
Nvidia developed the parallel computing platform, CUDA, to make this happen, and progressively the company broadened its reach into other industries. And as the AI boom took hold, Nvidia’s GPU found its next massive growth driver.
But Nvidia didn’t stop with just the GPU, and instead expanded its AI offerings to include a wide range of products and services to make itself the one-stop shop for any AI project. Nvidia is “the on ramp” to the AI world, chief executive officer Jensen Huang said in a recent interview on podcast BG2Pod. And the company indeed has all the major AI market participants on board, counting companies such as Meta Platforms and Amazon as customers.
In fact, in recent times, Oracle co-founder Larry Ellison said he and Tesla chief Elon Musk took Huang out to dinner and “begged” for more GPUs.
So, it’s clear Nvidia has a solid position in AI, a market set to grow from $200 billion today to $1 trillion by the end of the decade, and this has translated into an explosion in earnings and share performance in recent years.
Now, let’s get back to my prediction. Even as Nvidia forecasts slower growth in the third quarter, why will the fourth quarter be so big for the company?
