Despite increasing competition, Nvidia holds 80% of the rapidly growing artificial intelligence chip market as the tech industry’s graphics processing unit, or GPU, of choice for creating and deploying synthetic AI software.
What investors will want to know when Nvidia reports third-quarter earnings on Wednesday is whether it can continue to grow at a breakneck pace, even as the AI boom enters its third year. .
HSBC analyst Frank Lee wrote in a report this week that Nvidia is entering “uncharted territory” as it tries to continue growing at a $3.5 trillion market cap.
“We have been pondering this incredible growth trajectory and not only do we see no signs of slowing down, but we expect data center growth in 2026 to continue,” Lee said in his note. continue to increase”. He has a buy rating on the stock.
Future growth will have to come from Blackwell, whose next-generation chips have just begun shipping to end users like Microsoft, Google and OpenAI. More important than Nvidia’s third-quarter results will be what the company says about demand for Blackwell chips.
Nvidia CEO Jensen Huang will likely update investors on the ongoing situation on Wednesday, and he will likely address reports that some systems based on Blackwell chips are experiencing problems. overheating problem.
In August, Nvidia said it expected Blackwell’s revenue to reach “several billions” in the January quarter.
“Our base case scenario is that NVDA will ship around 100K Blackwell GPUs in Q4, which we believe is close to lower than investors’ expectations.” He has a strong buy rating on the stock.
Since Nvidia’s most recent earnings report, shares are up nearly 19%, marking an impressive increase that has seen the stock price rise eightfold since ChatGPT was released in late 2022. The stock’s rise has seen revenue and margins rise sharply, and according to FactSet, its forward price-to-earnings ratio has risen to just under 50.
Growth is slowing, but that’s partly because Nvidia’s revenue is a lot bigger than it used to be. Nvidia reported sales growth of 122% in its most recent quarter. That’s lower than the 262% year-over-year growth it reported in the fourth quarter and the 265% growth in the first quarter.
Analysts polled by LSEG are expecting revenue of about $33.12 billion, up nearly 83% from a year ago. The company is also expected to post 75 cents in earnings per share, according to LSEG consensus estimates.
Nvidia’s data center business accounted for nearly 88% of revenue in the most recent quarter, shifting the company’s focus away from its traditional computer gaming business.
For example, the company makes chips for Nintendo Switch, a Japanese video game company speak is seeing a significant decline in sales as consoles age. According to FactSet estimates, Nvidia’s gaming business is expected to grow about 6% to $3.03 billion. The auto business, which makes chips for electric cars, remains small, although analysts expect its revenue to rise 38% to about $360 million.
But that won’t matter as long as Nvidia’s data center business continues to grow at a nearly double annual rate, and Huang signaled to investors that the party isn’t over.
