It seems Nvidia(NASDAQ:NVDA) is a victim of its own success. After another incredible quarter in which it doubled its earnings per share (EPS) year over year, shares of the chipmaker fell in the days following the release of third-quarter numbers. The fact is that expectations could hardly be higher. It’s a good thing the business still seems to be operating at full capacity.
This isn’t the first time something like this has happened, and it probably won’t be the last. Nvidia saw its stock fall nearly 20% in the weeks following its latest release, only to gain nearly 35% from that low. There is good reason to remain optimistic, as next year will be full of major catalysts for the company.
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On Tuesday, December 3, Nvidia joined other leaders Artificial Intelligence (AI) companies to discuss the future of the industry with the investment community. The annual UBS The Global Technology and AI Conference provides an opportunity for Nvidia to demonstrate continued leadership and explain why it still has more to do. The event combines technical and practical, highlighting the impact AI can have on real-world value creation.
While a single event is unlikely to make a difference, the company – and the industry, for that matter – has every chance of making its case. Here are three reasons why Nvidia is a buy as the event begins.
Look, this isn’t news, but it bears repeating: the AI market is huge, growing rapidly, and there are plenty of reasons to believe it will continue. PwC – one of the “big four” accounting firms – estimates that AI can add $15.7 trillion to the global economy by 2030. Statista forecasts a compound annual growth rate (CAGR) for the total market of AI by 28.3% until 2030.
It’s not just analysts and talking heads who think so; Silicon Valley CEOs have reiterated their commitment to AI and, more specifically, to spending billions of dollars on AI infrastructure. In Metait’s the last call for resultsCEO Mark Zuckerberg said that despite record capital spending, his company “should invest more” because AI will “accelerate (Meta’s) core business” and “should have a strong return on investment over the next few years.” years”.
This is great news for Nvidia. The company’s chips supply the vast majority of the industry, and this market dominance is expected to continue for the foreseeable future. At this point, not even AMD can offer a chip that matches the performance of Nvidia’s flagship chips. Although this lead will likely diminish over time, it is unlikely that Nvidia’s lead will be surpassed. Nvidia has enormous resources – both capital and talent – that it can use to defend its pole position.
Blackwell, Nvidia’s new line of Superchips, is releasing this month and samples are already in the hands of several of its major customers. The chips are incredibly powerful, more than twice as powerful as its current Hopper chips, and demand for them is at an all-time high. CEO Jensen Huang called the demand “staggering” and reports said the company had been out of stock for a full year.
This is a big moment for Nvidia and Wall Street wants to see the company have a successful launch. If any hiccups are expected, Nvidia’s management team certainly didn’t share them during the third-quarter earnings conference call. The team painted a rosy picture for next year and Blackwell deployment, expecting to ship more Blackwells than expected. I think there’s a good chance that Blackwell’s earnings will be even bigger than Wall Street expects, but we’ll learn a lot more in the months to come.
The term has been thrown around a lot recently, but one of the main focuses of Nvidia’s call, besides launching Blackwell, was the development and adoption of agentic AI – essentially AI that can actually TO DOnot just create. Jensen Huang likes to think of them as “AI colleagues” who can “help employees do their jobs faster and better.”
I think agentic AI, if done well, is where the real value of AI lies. This is where real efficiency gains can be made in organizations of all types. One of the recurring questions in the market as a whole is whether AI can deliver value that justifies the enormous costs involved. If it is possible, this is where we will see it.
Nvidia is ahead of this trend, offering “an operating platform for agentic AI,” as Huang puts it, insisting that industry leaders are already using it to build “co-pilots.” ” – an industry term for AI assistants and agents.
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Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Johnny Rice has no position in any of the stocks mentioned. The Motley Fool holds positions and recommends Advanced Micro Devices, Meta Platforms and Nvidia. The Mad Motley has a disclosure policy.
