Nvidia’s Blackwell GPUs Spark Wave of Investment in AI
Nvidia (NASDAQ: NVDA) leads the market in advanced graphics processing units (GPUs) essential for artificial intelligence (AI) development. Major tech firms are investing heavily in these chips to gain a competitive edge in the AI landscape.
Due to this surge, Nvidia’s data center revenue has seen remarkable triple-digit growth over the last six quarters. However, some Wall Street analysts are expressing doubts regarding the sustainability of this AI spending trend.
During an earnings call regarding the fiscal 2025 third quarter (ending Oct. 27), Nvidia CEO Jensen Huang addressed these concerns. He shared insights into the growing demand for the new Blackwell GPUs, indicating a bright future for investors.
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Revolutionizing AI with Blackwell Architecture
Developing AI applications can be expensive. A single data center GPU may cost as much as $40,000, with advanced AI models requiring many of these chips to function effectively. Nvidia’s H100 and H200 GPUs have been the primary choice for AI development throughout the past year, built on the Hopper architecture acclaimed for its performance and energy efficiency.
The new Blackwell architecture, however, represents a significant upgrade. For instance, a Blackwell-based GB200 NVL72 system can perform AI inference 30 times faster than an H100 setup while matching its energy efficiency. This innovation results in considerable cost savings for data center operators such as Microsoft and Amazon, as well as the AI developers leasing their computing power.
A single GB200 GPU in the NVL72 system is priced around $83,333, double the initial cost of the H100. Though this price tag is steep, the dramatic 30-fold increase in AI inference performance justifies the expense for developers.
In other words, Blackwell makes sophisticated AI models accessible to more businesses and developers.
The Financial Impact of Blackwell on Nvidia
Nvidia reported $30.8 billion in data center revenue for the fiscal 2025 third quarter, reflecting a 112% increase from the previous year. The company shipped only 13,000 sample Blackwell GPUs to customers, so their contribution to this revenue was limited, but sales are predicted to rise sharply moving forward.
Microsoft reportedly ranks as the leading customer for Blackwell. While the precise size of its orders is unknown, the company allocated $20 billion for capital expenditures (capex) in the fiscal 2025 first quarter (ending Sept. 30), following a total of $55.7 billion in capex for fiscal 2024. Most of this funding is earmarked for AI data center infrastructure and chips.
Amazon, another significant Nvidia customer, anticipates AI capex spending around $75 billion in calendar 2024. Additionally, Meta Platforms is set to spend as much as $40 billion this year. Oracle will update its capex plans in December, already committing to construct clusters using 131,000 Blackwell GPUs.
However, some analysts caution that such levels of spending may not be sustainable. Although Goldman Sachs remains optimistic about AI, it notes that a standout AI application has yet to emerge that would warrant the massive investments being made by these tech firms. If current spending only yields chatbots and code generators, there could be a significant overspend in the tech sector.
Ultimately, investors will seek a return on these hefty expenditures.
Nvidia’s Growth Prospects Remain Strong
Investors in Nvidia have little reason to panic for now. During the third-quarter conference call, Huang described demand for Blackwell as “staggering.” He initially projected that these new chips would generate “several billion dollars” in revenue for the fourth quarter of fiscal 2025, but suggested that actual figures could surpass this estimate without providing specifics.
When questioned about a potential slowdown in spending as firms digest their current investments, Huang dismissed concerns, indicating that he does not foresee any decline until $1 trillion in existing data centers undergo modernization with new GPUs over the next few years. This trajectory bodes well for Nvidia’s sales, which could continue to grow through 2030 before data center operators reconsider their expenditures.
Moreover, not all analysts share concerns about a spending slowdown. Morgan Stanley estimates that Microsoft, Amazon, Meta Platforms, and Alphabet will collectively spend around $300 billion on AI infrastructure in 2025. The investment bank forecasts that Nvidia could ship up to 300,000 Blackwell GPUs in the last quarter of 2024, with potential shipments increasing to 800,000 by the first quarter of 2025.
This optimistic outlook suggests that current Nvidia investors might find it beneficial to hold onto their shares, and for new investors, it may still be an opportune time to engage with this promising company.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Goldman Sachs Group, Meta Platforms, Microsoft, Nvidia, and Oracle. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
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