Nvidia’s Stellar Growth: A Power Player in the AI Revolution

It has been two years since the launch of ChatGPT by OpenAI, and Nvidia (NASDAQ: NVDA) has emerged as a clear frontrunner in the generative AI sector.

Nvidia’s stock has skyrocketed, increasing tenfold since the start of 2023, significantly enriching investors. Recently, it reclaimed its status as the world’s most valuable company, boasting a market capitalization exceeding $3.5 trillion.

Despite concerns around increasing competition and the potential for an AI bubble, Nvidia continues to impress with outstanding financial results. The company showcased its growth in the third-quarter earnings report for fiscal 2025, released on Wednesday.

In the latest quarter, total revenue soared by 94% year-over-year to $35.1 billion, surpassing the consensus estimate of $33.1 billion. A standout performer was the data center segment, where revenue surged 112% to $30.8 billion. This surge reflects the high demand for its graphics processing units (GPUs), which remain in short supply.

Profits also experienced a remarkable rise, illustrating Nvidia’s efficiency in managing operating expenses. According to generally accepted accounting principles (GAAP), operating income rose 110% to $21.9 billion, while adjusted earnings per share climbed from $0.40 to $0.81, outpacing expectations of $0.75.

Image source: Nvidia.

Nvidia’s Rapid Expansion Amidst Competition

Nvidia’s growth is unprecedented for a company of its size. Although its 94% revenue growth rate marks the slowest in six quarters, it still exceeds many analysts’ expectations. Notably, the dollar amount added to revenue each quarter is increasing, indicating that overall business growth is accelerating.

Earlier this year, some analysts raised doubts about Nvidia’s ability to maintain its AI chip market dominance with competitors like Advanced Micro Devices and Intel releasing their own AI accelerators. However, these rivals have struggled to make significant impacts on Nvidia’s market share. AMD’s recent disappointing earnings and the announcement of layoffs, coupled with Intel’s restructuring after hitting a 20-year stock low, underline Nvidia’s strong position.

A key constraint on Nvidia’s expansion remains supply, as CEO Jensen Huang described the demand for its new Blackwell architecture GPUs as “insane.” CFO Colette Kress emphasized that customers are eager to be the first to market with these advanced chips. Huang pointed out the extensive reach and application of the Blackwell technology, noting that almost every company is involved in its supply chain.

Concerns about an “AI bubble” persist, with critics questioning whether the market can sustain the heavy investments in AI infrastructure that are fueling Nvidia’s growth. Huang countered these assertions during the earnings call, asserting that the scaling of their foundation model pre-training remains intact. He stressed the importance of scaling for post-training and inference to enhance the capabilities of large language models and other AI systems.

Is Nvidia Still a Good Investment?

Having weathered competition from AMD and Intel while reporting another remarkable quarter, Nvidia appears to be on an unstoppable path.

The company projects revenue for the fourth quarter to reach $37.5 billion, a 70% increase from the same quarter last year, driven by demand greatly exceeding supply. Huang envisions a future where Nvidia’s technology serves as the backbone of AI factories—data centers dedicated to AI applications, and businesses across various sectors are rushing to adopt it.

Although Nvidia’s stock fell slightly in after-hours trading on Wednesday, this dip reflects its valuation and management’s guidance rather than the business’s fundamentals. The stock is trading at a P/E ratio of 45 based on its projected earnings per share, but considering its growth trajectory, it does not seem overpriced.

Nvidia remains a leader in the AI transformation, and its stock continues to present a strong investment opportunity.

A Unique Investment Opportunity Awaits

Do you sometimes feel like you missed out on investing in successful stocks? If so, you’ll want to pay attention here.

On select occasions, our experts issue a “Double Down” stock recommendation for companies poised for significant growth. There’s no better time to invest, especially considering:

• Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $368,053!*
• Apple: if you invested $1,000 when we doubled down in 2008, you’d have $43,533!*
• Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $484,170!*

We are currently issuing “Double Down” alerts for three exceptional companies, and opportunities like this do not come around often.

See 3 “Double Down” stocks »

*Stock Advisor returns as of November 18, 2024

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Intel, and Nvidia. The Motley Fool recommends the following options: short November 2024 $24 calls on Intel. The Motley Fool has a disclosure policy.

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