Data center revenue growth is sustainable, says Third Bridge
Third Bridge analyst Lucas Keh thinks the quarter-to-quarter revenue growth rate in Nvidia's data center segment is sustainable over the next several quarters amid growing demand for AI chips from cloud providers.
Keh points to an increasing concentration in revenue from public cloud companies – now half of total revenue – as a positive sign of hyperscaler adoption for Blackwell, despite the delays.
He also says that the company attributed a decline in data center GPU margins "to a shift from customers from H100-based systems to more complex solutions like B200 and H200." This could suggest that Nvidia will not price Blackwell as aggressively "initially to spur adoption against competitive threats in the market like Advanced Micro Devices (AMD)."
- Karee Venema
Nvidia earnings call highlights
On Blackwell: Nvidia Chief Financial Officer Colette Kress said production is in "full swing," and underscored "staggering demand" for the new AI chips. She also said margins will likely rise as Blackwell production accelerates to meet demand.
Nvidia CEO Jensen Huang said the company will deliver more Blackwell chips in the fourth quarter than previously anticipated and that execution is "going well."
Kress added that fourth-quarter revenue from Blackwell chips could top prior estimates of "several billion dollars."
On Trump: Huang said that the company will take things one quarter at a time, but will "fully" comply with regulations. "Whatever the new administration decides we will of course support the administration."
On AI and robotics: Huang said AI has created "a new industrial revolution" that is currently underway. "There are more foundation model makers now than there were a year ago. The computing scale of pre-training and post-training continues to grow exponentially. There are more AI native startups than ever, and the number of successful inference services is rising."
He added that "the age of robotics is coming" and that "Nvidia's expertise, scale, and ability to deliver full stack and full infrastructure let us serve the entire multi-trillion-dollar AI and robotics opportunities ahead, from every hyperscale cloud, enterprise private cloud, to sovereign regional AI clouds, on (premise) to industrial edge, and robotics."
- Karee Venema
Nvidia gives strong fiscal Q4 guidance, talks Blackwell shipmets
For its fiscal fourth quarter, Nvidia is calling for revenue of $37.5 billion, plus or minus 2%. This compares to Wall Street's forecast for Q4 revenue of $37.0 billion.
The company had the following to say about its highly anticipated Blackwell chips:
We completed a successful mask change for Blackwell, our next Data Center architecture, that improved production yields. Blackwell production shipments are scheduled to begin in the fourth quarter of fiscal 2025 and will continue to ramp into fiscal 2026. We will be shipping both Hopper and Blackwell systems in the fourth quarter of fiscal 2025 and beyond. Both Hopper and Blackwell systems have certain supply constraints, and the demand for Blackwell is expected to exceed supply for several quarters in fiscal 2026.
- Karee Venema
Nvidia's third-quarter results are out
For the three months ended October 27, the chipmaker reported earnings of 81 cents per share – up 19% quarter over quarter and more than doubling on a year-over-year basis. Revenue arrived at $35.1 billion, a 17% increase over Q2 and 94% over the year prior.
Data center revenue, which houses the company's AI segment, came in at $30.8 billion, marking a 17% improvement over the second quarter and rising 112% YoY. Automotive revenue also saw a notable year-over-year increase, jumping 72% to $449 million.
Analysts tracked by S&P Global Market Intelligence expected earnings of 75 cents per share on revenue of $33.1 billion.
The company also said it initiated $11 billion in stock buybacks in Q3 and paid out $245 million in dividends.
At last check, NVDA shares are down 3.4% in after-hours trading.
- Karee Venema
Are expectations for Nvidia "insane"?
As LPL Financial Chief Global Strategist Quincy Krosby observes in a note on the company's fiscal third-quarter earnings announcement, there's a lot riding on Nvidia stock right now.
"With markets concerned about the latest phase of the Russia/Ukraine conflict – and with European leaders worried over Moscow's next move – Walmart's positive guidance helped support U.S. markets yesterday," Krosby writes. "But it was a parade of enthusiastic comments regarding NVDA's Q3 earnings call following [yesterday's] market close, that seemingly had the market exceptionally excited."
Krosby notes that "options markets have been pricing in a move of nearly 10% in either direction" for NVDA's share price, "underscoring uncertainty going into this afternoon's earnings report (the average has been around 9%)."
NVDA has moved up from its intraday lows but is still down about 1.9% at $144.28 a little more than two hours before management reports results.
Krosby highlights "a wide-reaching narrative over whether NVDA can once again surpass analyst expectations" as valuations – NVDA's as well as the broader market's – continue to climb. The strategist would also like to know more from Nvidia management about "a conspiracy theory making the rounds that a story was planted to shed doubt on the long-awaited Blackwell chip, suggesting that it overheats within the servers." We discussed yesterday that this story may or may not have been "planted" in The Information.
The bottom line here is "the options market is reflecting swings in the stock price following release of the numbers and during the conference call with the CEO." As Krosby concludes, "The market is hoping for not just strong guidance but 'insane' guidance that's not yet priced in."
Stay tuned.
- David Dittman
Is Nvidia the best stock of all time?
Nvidia was already one of the best long-term holdings of all time before the stock went on an epic run this year. Indeed, NVDA's share price had essentially tripled for the year to date on the eve of its Q3 post-market earnings release.
But then longtime shareholders should be used to such returns by now.
After all, from its initial public offering at $12 a share in January 1999 through December 2020, NVDA stock created $309.4 billion in shareholder wealth, according to an analysis by Hendrik Bessembinder, a finance professor at the W.P. Carey School of Business at Arizona State University.
Indeed, per Bessembinder's findings, which account for a stock's increase in market value adjusted for cash flows in and out of the business and other factors, Nvidia was one of the best stocks of that 30-year period.
At this point readers may have noticed that it is now the year 2024 – or many years since the original study's cutoff date.
Happily, Bessembinder updated the results. And even after missing NVDA's epic 2024 rally, this is a name that truly stands out.
After studying the return outcomes of the 29,078 publicly listed common stocks contained in the Center for Research in Security Prices database from December 1925 to December 2023, "the highest annualized compound return for any stock with at least 20 years of return data was 33.38%, earned by Nvidia shareholders," Bessembinder writes.
True, Nvidia did not generate the greatest cumulative return. That honor belongs to tobacco titan Altria (MO), which is currently one of the stocks with the highest dividend yields in the S&P 500. But when it comes to the historical record, no name beats Nvidia for generating lots of wealth really fast.
– Dan Burrows
Nvidia stock trades lower ahead of earnings
Nvidia opened Wednesday's session lower as investors take some profits ahead of this evening's earnings announcement. Shares were down 1.2% at last check, putting pressure on all three main benchmarks.
About 15 minutes into the trading day, the Dow is down 0.1%, the S&P 500 is off 0.4% and the Nasdaq Composite is 0.5% lower.
- Karee Venema
Nvidia earnings and Blackwell questions
The other big question around Nvidia's after-the-closing-bell event on Wednesday – other than the magnitude of its earnings beat and its guidance raise – is when the AI chipmaker will see a financial bounce from its new Blackwell platform.
Nvidia stock added 4.9% on Tuesday as already high expectations keep rising ahead of Wednesday night's print. Wall Street will also be looking to see what management has to say about Blackwell, particularly following a recent report in The Information that suggests the new chips are overheating when installed in high-capacity server racks.
"Supply chain data points, as well as discussions with industry participants, remain skewed positively," writes Stifel analyst Ruben Roy in a note on NVDA, "and we expect another beat/raise scenario." Roy says that "expectations are elevated" and that "our scenario appears to be widely anticipated" – adding that "our conversations suggest that a Blackwell-driven inflection to the upside is more likely an April quarter event than January."
Roy emphasizes that "the timing of expected Blackwell-based configurations has not changed in recent weeks. In aggregate, estimates have been moving higher for fiscal 2026 and fiscal 2027 and we believe that a diverse set of data points support the positive revisions."
Concluding this morning's note, Roy reiterated his Buy rating on NVDA and raised his price target from $165 to $180. That new target suggests implied upside of about 22% to the stock's November 19 close.
- David Dittman
Robotics AI: Nvidia's next big market?
Quarterly earnings reports are backward-looking but the market is forward-looking. As much as market participants care about what a company has done for them lately, what they really want to know is how much cash the company is going to throw off over the long haul.
That's why corporate guidance is often more important than whatever a firm's income statement, balance sheet and cash flow statement tell investors about a three-month period that's already in the history books.
It's also why companies that post beat-and-raise quarters tend to see their share prices pop on the news.
Nvidia stock's meteoric rise has been driven in part by the way the most important company in the AI universe keeps delivering big top-line beats. Wall Street is already braced for another one, as well as the implications for forward sales, margins and profits.
This is standard stuff. But, believe it or not, industry analysts are also paid to think well beyond the next 12 months. Their clients want detail, color and granular information, not just updates to discounted cash flow models.
They also want their analysts to offer, well, analysis.
With that in mind, here's something NVDA bulls might want to consider as the Street dives into the post-print meeting with management.
"We believe there are two bullish factors that may not surface explicitly (or even implicitly) on the earnings call but are important to NVDA's position in compute generally and its revenue growth in the next few years," writes William Stein, managing director at Truist Securities, in a note to clients.
Although current demand and investor interest around all things AI is focused on various large language models (LLMs) such as ChatGPT, Stein notes that physical AI (robotics) and data processing are rapidly emerging. This has positive implications for demand for NVDA's parallel compute technology, which accelerates traditional compute workloads.
"Second, just as NVDA ramps delivery of Grace CPU in the data-center business, we anticipate the company will announce a client CPU during 2025, opening up significant additional total addressable market," Stein adds.
The analyst rates NVDA stock at Buy with a $167 target price, giving shares implied upside of about 17% in the next 12 months or so.
– Dan Burrows
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Nvidia smokes the rest of the Mag 7
The most commonly used benchmark for U.S. equity performance is the S&P 500. It's up about 23% on a price basis so far this year. The riskier and growthier Nasdaq-100 – or the 100 largest non-financial companies in the Nasdaq Composite – has gained more than 25%, while the Nasdaq Composite itself is up almost 25%.
All of these indexes are weighted by market cap, which means the stocks with the largest market values have the greatest influence on the direction of the benchmark. As some of the largest companies in the world and monopolistic AI plays, the Magnificent 7 stocks are responsible for a good chunk of the bull market's gains, and much of its buoyant sentiment.
Just have a look at the divergence between the market-cap-weighted S&P 500 and the equal-weight version of the S&P 500 – which treats every stock, well, equally – so far this year.
Nvidia has done more than any other stock to help lift the cap-weighted gauges to record high after record high. Indeed, as of this writing, NVDA is the second most valuable publicly traded company in the world again, behind only Apple.
In order to visualize Nvidia's outperformance relative to the other Mag 7 names that it's so happy to call its customers, we thought it would help to put all of their stocks' YTD price performance on a single chart.
To that end, have a look below to get a sense of which Mag 7 stocks are helping the market the most this year.
– Dan Burrows
Why are Nvidia earnings so important?
Nvidia is the most dominant stock in the equities market, driving 20% of the S&P 500's return over the past 12 months, says BofA Securities analyst Gonzalo Asis. He adds that the chipmaker "is expected to drive nearly 25% of the S&P 500's earnings per share growth in the third quarter."
The analyst says that clues in the options market show us just how important Nvidia earnings are for investors. Indeed, Asis notes that options contracts are currently pricing in more broad-market risk for NVDA earnings (implied move of 1.15%) than they are for the upcoming monthly jobs (implied move of roughly 1.05%) and Consumer Price Index (implied move of around 0.9%) reports.
- Karee Venema
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Analysts race to hike NVDA price targets
Wall Street analysts are busy updating their models ahead of Nvidia's bellwether earnings report. This isn't unusual. If there's something striking about these revisions, it's how fast analysts are hiking their price targets on the Magnificent 7 stock.
According to data from S&P Global Market Intelligence, as of November 15, analysts' average price target stood at $159 for NVDA stock. That gave shares implied upside of about 13% over the next 12 months or so.
If investors respond to the potential for 13% price upside over the next year with a "big wow," that's understandable. After all, NVDA stock has tripled in 2024 so far alone. The Street forecasts average annual earnings growth of 35% for the next three to five years, and yet NVDA shares change hands at just 42 times expected earnings.
Mind you, this does not begin to scratch the surface of the bull case. NVDA gets a rare consensus recommendation of Strong Buy, per S&P Global Market Intelligence. It's one of the Street's top S&P 500 stocks to buy.
Surely analysts who are so bullish on a stock see more than 13% upside in the next year or so.
Don't worry; they probably will soon enough.
Indeed, they're already updating their price targets at an accelerating rate. The Street's average target price jumped 5% over the past week. Just have a look at the below chart.
Investors can expect more upward revisions to NVDA's target price as we get closer to its earnings report. And we will certainly see a slew of updates once the NVDA print is in.
The bottom line: Take price targets with a grain of salt. Nvidia isn't as popular as it is because it's offering a 13% price return over the next year.
– Dan Burrows
About Elon's xAI and Its $6 Billion Nvidia Chip Buy
According to a report from David Faber of CNBC, Elon Musk's xAI is raising as much as $6 billion to buy 100,000 Nvidia chips.
"Sources told Faber that the funding, which should close early next week, is a combination of $5 billion expected from sovereign funds in the Middle East and $1 billion from other investors, some of whom may want to re-up their investments," CNBC reports. The fresh raise values xAI, which Musk founded in September 2023, at $50 billion.
Bloomberg's Ed Ludlow asks an interesting question on X, the social media platform formerly known as Twitter: "On the report that xAI is going to buy 100,000 NVDA chips… didn't Elon Musk already say that?"
The world's richest person did tease the transaction more than two weeks ago on X, retweeting an invitation from an insider to "Join the xAI compute team!" which itself was a retweet of ServeTheHome's tweet touting its tour of the xAI Colossus AI Supercluster.
"Soon to become a 200k H100/H200 training cluster in a single building," said Musk on October 28 of the facility in Memphis, Tennessee. The supercomputer is rumored to be support for Tesla's (TSLA) Full Self Driving software.
"The money will be used to acquire 100,000 Nvidia chips, per sources familiar with the situation," said CNBC on November 15. It seems "the money" – specifically, the $6 billion and where it's coming from, not so much where it's ultimately going – is indeed the story here.
Nvidia stock is down nearly 4% two hours ahead of Friday's closing bell, giving back some of the lead it had built up recently in the global market capitalization rankings. This slump comes despite the fact that Wedbush Securities analyst Matt Bryson recently bumped his price target on NVDA from $138 to $160.
Tesla stock, meanwhile, is up nearly 3%, rising against the tide as the relationship between the electric vehicle maker's CEO and President-elect Donald Trump appears to be paying off in particular ways, most notably around EV tax credits.
- David Dittman
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Should you buy Nvidia stock at current levels?
"To buy or not to buy?" is a question a lot of investors have about Nvidia stock ahead of the AI chipmaker's November 20 fiscal third-quarter earnings release.
NVDA stock traded as high as $148.91 today (November 14), within 0.5% of the all-time high it hit intraday on November 8. Nvidia is the biggest company in the world based on market capitalization at $3.6 trillion, and there's some distance developing between it and No. 2 Apple (APPL) as well as No. 3 Microsoft (MSFT).
NVDA has been defying conventional ideas about "valuation" for a while now. It's also been defying conventional rules about big numbers, rising as rapidly as any company ever has up the market-cap ladder thanks to a steady stream of beat-and-raise quarterly reports.
Indeed, according to Anton Shilov of Tom's Hardware, maybe you should consider yourself lucky to still have the opportunity to consider whether you should buy Nvidia at these levels.
"At Nvidia's AI Summit in Tokyo this week," Shilov writes, citing an original report in Fortune, "Jensen Huang, chief executive of Nvidia, and Masayoshi Son, the head of SoftBank, expressed regrets that the former did not privatize Nvidia a decade ago when the latter offered him money to do so."
Huang and Son talked about privatization as well as a potential merger with Arm Limited, a move that was blocked by regulators in February 2022. Arm subsequently went public as Arm Holdings (ARM) in September 2023.
"Masa said, 'Jensen, the market doesn't understand the value of Nvidia. Your future is incredible,'" said Huang. "'Your journey of suffering will continue for some time, so let me give you the money to buy Nvidia.' He wanted to lend me money to buy Nvidia, all of it. Now I regret not taking it."
So, "to buy or not to buy" Nvidia at $149…
- David Dittman
Wedbush girds for another beat-and-raise quarter
Nvidia heads into its November 20 earnings release as one of Wall Street's top S&P 500 stocks to buy. On Thursday, Wedbush Securities analyst Matt Bryson helped explain why.
Bryson, who rates NVDA at Outperform (the equivalent of Buy), writes in a new note to clients that the pace-setting chipmaker has forced him to confront an age-old tongue twister: "How much sales acceleration can an accelerator accelerate if an accelerator can accelerate sales?"
What does that mean? Stocks move on surprises, be they to the upside or the downside. NVDA stock has tripled on a price basis over the past 52 weeks in part because it consistently delivers upside surprises on its top line. (Note that NVDA stock is also much more volatile than the broader market, but let's not get into that right now.)
Will NVDA stock pop on its earnings report? That depends partly on delivering beat-and-raise revenue figures.
So, what's the outlook for that, in Bryson's view?
"NVDA has been consistent in delivering a revenue beat of approximately $2 billion, while guiding for $2 billion-plus in growth the past few quarters," the analyst says. "We believe NVDA will likely at least modestly exceed the pattern of 'just' beating forecasts by approximately $2 billion, as we anticipate strength in Q3 AI spend by hyperscale customers, as well as continued solid growth at non-hyperscale accounts will boost FQ3 sales."
There's a lot more to it than that, but the bottom line is Bryson lifted his target price to $160, giving NVDA stock implied upside of 10% from current levels. For context, according to S&P Global Market Intelligence, the Street's average price target stands at just $158.
If this member of the Magnificent 7 prints a big enough beat-and-raise on the top line, you can bet a lot of those NVDA price targets will be revised upwards.
– Dan Burrows
Will the Supreme Court allow a class action lawsuit against Nvidia to proceed?
Nvidia's earnings announcement on November 20 is (probably) the Next Big Thing for stocks, investors and hardcore artificial intelligence nerds. (We'll see whether Federal Reserve Chair Jerome Powell breaks stride this afternoon…)
Tech generally has been underperforming the broader market in recent months, but the AI story is still driving up share prices across sectors. And Nvidia's hardware is supporting a lot of the buildout and the efficiencies end-users plan/hope to realize.
Making new high after new high, NVDA stock continues to reflect almost unanimous support among market participants as well as AI utilitarians.
It's another kind of thing to appear before the U.S. Supreme Court, though, which is where lawyers for Jensen Huang's juggernaut found themselves on Wednesday.
As Ronald Mann of ScotusBlog explains, a group of Nvidia shareholders has filed a proposed class action lawsuit under the 1995 Private Securities Litigation Reform Act alleging the company and key executives "made false and misleading statements about the extent to which use in crypto mining was propping up Nvidia's chip sales."
Following oral arguments on Wednesday, "The Supreme Court seemed inclined on Wednesday to allow a lawsuit accusing Nvidia, the giant maker of computer chips, of misrepresenting its reliance on the cryptocurrency mining industry in 2017 and 2018," observes Adam Liptak of The New York Times.
And yet Nvidia still enjoys broader tailwinds: The 1995 law imposes a difficult burden on plaintiffs.
"The shareholders have a hard time showing that Huang spoke falsely when he made statements downplaying the share of NVIDIA chip sales attributable to crypto mining," Mann writes. "The shareholders do not have any documents or statements that directly show any reason to think Huang knew what share of sales were made to crypto miners."
NVDA stock was up nearly 1% an hour after Thursday's opening bell, even as the three major equity indexes were in the red.
- David Dittman
I am the former managing editor and chief investment strategist of Utility Forecaster and the former editorial director of Investing Daily, Charles Street Research, and Weiss Ratings. I am also a former stockbroker and have been working in financial media for more than 20 years.
This will mark Nvidia's first time reporting as a Dow Jones constituent, with the semiconductor stock joining the 30-stock index back on November 8.
NVDA shares are well known for their post-earnings volatility, which could have an impact on the price-weighted Dow. Most recently, the stock sank more than 6% in August after its fiscal Q2 results and jumped 9% in May following its fiscal Q1 report.
However, as Dan Burrows, senior investing writer at Kiplinger.com, explains in his feature, "Nvidia Stock Is Joining the Dow. Is It Time to Buy?," NVDA and its $3.6 trillion market valuation will likely have a larger impact on the cap-weighted S&P 500 and Nasdaq Composite.
Indeed, based on its current share price of roughly $150, "NVDA stock will be as important to the DJIA as, roughly, 3M (MMM)," he writes.
- Karee Venema
Increased AI spending will continue to benefit Nvidia, says UBS
UBS Global Research analyst Timothy Arcuri lifted his price target on Nvidia on November 10, to $185 from $150 – representing implied upside of more than 25% to current levels.
Arcuri expects the chipmaker to report strong results and guidance this time around, though he anticipates a decline in gross margin, to 73% from 75.1% in Q2.
The analyst believes that capital expenditures from large-scale data centers will continue to improve and he expects the gap between incremental hyperscaler spending and Nvidia's incremental data center revenue to close over the next 12 months.
"On top of this, sovereign AI represents a major demand vector for NVDA (already worth more than $10 billion in calendar year 2024) with each of the large sovereigns (particularly in the Middle East) looking to us like their spending could approach that of a big U.S. hyperscaler over the next few years," Arcuri adds. India, for one, unveiled a $1.2 billion budget for AI projects in March.
- Karee Venema
I am the senior investing editor at Kiplinger.com, having joined the publication in April 2021. I have over a decade of experience writing about the stock market and have covered corporate earnings reports and stock reactions over that time frame. In addition to weekly updates of the Kiplinger Earnings Calendar, I oversee a wide range of investing coverage, including content focused on equities, fixed income, mutual funds, exchange-traded funds (ETFs), commodities, currencies, macroeconomics and more.
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