Nvidia Corporation (NASDAQ: NVDA) saw an impressive 150% surge in its stock price during the first half of 2024, yet it has faced challenges since mid-July as investors ponder potential obstacles ahead. A rumored delay regarding the company’s latest artificial intelligence (AI) chips for data centers, which play a critical role in generating the majority of its revenue, raised some concerns among analysts. Nevertheless, these worries appear to be easing, and here are several reasons why Nvidia’s stock could experience significant growth before the conclusion of 2024.
Focus on Next-Gen Blackwell GPUs
Nvidia’s H100 graphics processing units (GPUs) set impressive benchmarks in the AI sector last year, showcasing the company’s prowess in parallel processing. These GPUs excel at managing multiple tasks simultaneously while delivering substantial throughput, making them vital for processing hefty data loads critical for AI training and inference.
According to Jensen Huang, CEO of Nvidia, there’s potential for data center operators to invest up to $1 trillion in GPU infrastructure over the coming years. This presents a golden opportunity for Nvidia, prompting the company to continuously innovate its chip designs, enhancing processing capabilities and energy efficiency to maintain its competitive edge. Recently, Nvidia introduced its H200 GPU, which offers AI inference speeds nearly double those of the H100 while consuming half the energy. Furthermore, the unveiling of an entirely new architecture, designated Blackwell, promises to deliver even more remarkable performance advancements.
The new Blackwell-based GB200 NVL72 system stands out, boasting AI inference capabilities that are 30 times more efficient than the H100 equivalent. Priced between $30,000 and $40,000 per unit—similar to initial H100 costs—this development is expected to drive exceptional cost efficiency, creating a scenario where demand significantly outstrips supply. Huang projects that Blackwell GPUs could generate billions in revenue during the fourth quarter of fiscal 2025, commencing in November, effectively dispelling past rumors of delays.
High Demand from Major Customers
Nvidia’s major clients are urgently seeking more GPUs for their operations. Huang noted that data center operators can generate $5 in revenue for every dollar spent on GPUs by leasing processing capacities to AI developers. As a result, leading cloud service providers—such as Microsoft, Amazon, and Oracle—are racing to acquire as many GPUs as they can.
Tech companies, too, are ramping up their requests for chips to further their AI initiatives. Tesla aims to deploy a robust cluster of 50,000 GPUs by 2024 to advance its self-driving AI capabilities. Meanwhile, Meta Platforms is targeting an ambitious deployment of 600,000 equivalent H100 GPUs to enhance its Llama large language models, which power new AI features across Facebook and Instagram.
However, Nvidia is struggling to meet the soaring demand. Oracle’s chairman, Larry Ellison, shared at a dinner with Huang and Tesla’s Elon Musk that they both urged Nvidia to accept more funding for additional GPUs. This need for supply is underscored by Microsoft’s staggering $55 billion spent on capital expenditures in fiscal 2024 (which concluded on June 30), primarily directed towards AI and data center infrastructure.
Nvidia recently recorded an exceptional $26.3 billion in data center revenue for the second quarter of fiscal 2025 (ending July 28), marking a staggering 154% increase from the previous year—an achievement that could have been even more substantial without supply limitations.
Nvidia Stock: A Potential Bargain for Future Earnings
Currently trading roughly 15% below its peak price, Nvidia’s stock is poised for recovery and beyond in the upcoming months. With a trailing earnings per share (EPS) of $2.20, the stock is priced at a price-to-earnings (P/E) ratio of 52.5, significantly outpacing the overall tech sector—represented by a P/E of 30.8 for the Nasdaq-100.
However, the stock market is inherently forward-looking. With Nvidia’s fiscal 2026 beginning in early 2025, investors will soon reevaluate the stock based on its anticipated earnings for the forthcoming year. Analysts predict an EPS of $4.02 in fiscal 2026, which would drop the forward P/E ratio to a more attractive 28.7, suggesting that from a future earnings perspective, Nvidia is comparatively undervalued.
Microsoft, Oracle, and Meta Platforms have all confirmed their intentions to ramp up capital expenditures on AI in the coming year. This enthusiasm from major clients reduces some uncertainty surrounding Nvidia’s projected financial performance.
In conclusion, there is a high likelihood that Nvidia’s stock will surpass its all-time closing high of $135.58 by the close of 2024. Investors keen on tapping into the immense potential of AI and cutting-edge technology would be wise to keep an eye on Nvidia’s progress and upcoming product launches, as the company appears poised for a lucrative future.
Before investing $1,000 into Nvidia, be sure to conduct thorough research and consider your investment strategy. The stock market can be unpredictable, and informed decisions can lead to significant long-term benefits.