The AI Revolution Gains Momentum: What’s Next for Nvidia?

Experts agree that artificial intelligence (AI) is set to revolutionize many industries, possibly marking the start of a new industrial era. Advanced algorithms can significantly boost productivity by automating tedious tasks. This shift has already benefited numerous companies, but few have thrived like Nvidia (NASDAQ: NVDA). With its cutting-edge graphics processing units (GPUs), Nvidia provides the essential power that enables AI technology.

This Thursday may bring another exciting opportunity for investors as Nvidia could see changes in its stock price. Let’s explore the upcoming events that might drive Nvidia’s market performance.

Image source: Getty Images.

TSMC’s Role in Nvidia’s Future

Taiwan Semiconductor Manufacturing (NYSE: TSM), or TSMC, stands as the leading contract semiconductor foundry globally, supplying about 90% of the most advanced AI chips. Nvidia is among TSMC’s largest clients, contributing roughly 11% to TSMC’s sales in 2023. TSMC’s financial performance can be an insightful indicator of Nvidia’s future.

On Thursday, TSMC is expected to release its third-quarter earnings, and early indications suggest strong results. The company provides monthly revenue updates, which allow analysts to gauge its performance. For the quarter ending September 30, TSMC reported revenue of NT$759.7 million (approximately $23.6 million), reflecting a remarkable year-over-year growth rate of about 39% compared to previous figures. Notably, this surpasses analysts’ expectations of $23.09 billion in revenue, which correlates to a 35% increase, and is also higher than TSMC’s previous forecast of $22.8 billion.

Surpassing its upper guidance indicates a sustained demand for AI chips—a positive sign for Nvidia.

In addition, Nvidia CEO Jensen Huang has been actively discussing the company’s upcoming Blackwell architecture, which is now in full production. Huang noted the strong demand for Blackwell, and Morgan Stanley analysts predict Nvidia may earn $10 billion from Blackwell chips in the fourth quarter of fiscal 2025, ending in late January.

Is Now the Right Time to Invest in Nvidia?

The consistent demand for AI technology might act as a catalyst for Nvidia, especially following TSMC’s announcement. However, should investors acquire Nvidia stock before October 17?

Actually, the timing may not be critical. Nvidia’s stock reached a record high on Monday, boosting its market cap to $3.4 trillion, with a massive 200% increase over the past year. Over the last decade, Nvidia shares have skyrocketed by 32,770%, showcasing the long-term rewards of investing in high-quality stocks.

It’s important to note that Nvidia’s stock price already reflects significant growth potential, trading at 65 times its earnings. While this valuation might alarm some investors, analysts forecast earnings per share of $4.04 for Nvidia’s fiscal 2026, beginning in January. This leads to a more moderate forward multiple of 34, suggesting that the stock’s valuation is more reasonable than it initially appears.

Experts agree that we are still in the early stages of AI adoption. Projections estimate that the generative AI market could generate between $2.6 trillion and $4.4 trillion yearly in the coming years, so these numbers may well be conservative.

Owing to Nvidia’s central role in the AI landscape and its growth prospects, when you choose to invest—whether it’s before or after October 17—might be less important than simply making the investment.

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*Stock Advisor returns as of October 14, 2024

Danny Vena has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.