Nvidia Faces a Pivotal Moment with Blackwell Chip Launch

Nvidia (NASDAQ: NVDA) is on the brink of a major launch that could reshape the AI chip market. The company plans to unveil its Blackwell architecture, featuring several innovative attributes aimed at enhancing its already dominant position. Nvidia intends to increase production of the Blackwell chip in the fourth quarter.

This launch arrives at a crucial period for the tech giant. Over the past few years, Nvidia has established a stronghold in the AI sector, continually achieving remarkable revenue growth. However, as revenue levels soar to unprecedented heights, maintaining triple-digit growth may prove challenging. Furthermore, competitors are introducing their chips to capture market share. So, a critical question emerges: How will Nvidia perform six months post-Blackwell launch? A look into history and current trends may provide some insights.

Image source: Getty Images.

Insights on the Blackwell Launch

To understand the Blackwell launch, we first need to recognize Nvidia’s journey. The company has achieved a commanding presence in the AI market by creating powerful chips and a comprehensive product lineup that clients can use for their data centers or merely for GPUs.

As a result, Nvidia’s quarterly revenue has hit a record $30 billion, maintaining a gross margin exceeding 70%. Recently, it reported net income of over $16 billion—marking significant growth.

Investors are keenly anticipating the Blackwell launch, bolstered by the architecture’s six revolutionary features. These range from Nvidia’s best chip yet to a state-of-the-art maintenance system designed to optimize system uptime, along with a fifth-generation NVLink that promises fast communication among up to 576 GPUs.

Nvidia plans to boost Blackwell production shortly, and CEO Jensen Huang provided encouraging remarks about customer demand during the latest earnings call. He mentioned that demand has outstripped supply and expects this trend to persist into the next year. In a recent CNBC interview, he described the demand for Blackwell as “insane.”

Financial Outlook for Nvidia

Nvidia anticipates substantial revenue from Blackwell in the fourth quarter. The new architecture is expected to quickly contribute to Nvidia’s financial growth. Additionally, the company aims for a gross margin in the mid-70% range for the full year, demonstrating its ability to launch a significant product while keeping its profitability high.

Reflecting on Nvidia’s past, the six months following the 2022 introduction of its previous architecture, Hopper, saw the stock nearly double. The earnings report for the period ending April 30, 2023, showed that demand for the Hopper platform surged, contributing to record revenues in the data center segment. This historical performance offers a hopeful perspective on Nvidia’s fate after the Blackwell launch.

Other factors add to this optimism. As Nvidia optimizes the Blackwell production and navigates initial launch expenses, it may enhance its profit margins. Though this improvement might not manifest within six months post-launch, any margin progression beyond the current 70% would be a bonus.

Nvidia’s Competitive Customer Base

While Nvidia doesn’t disclose revenue percentages by customer, analysts suggest its biggest clients include Microsoft, Meta Platforms, Amazon, and Alphabet. This is encouraging, as these companies are well-positioned to amplify their investments as the AI revolution unfolds.

Recent testimony from industry leaders highlights this eagerness. For example, Oracle co-founder Larry Ellison mentioned that he and Tesla CEO Elon Musk practically “begged” Nvidia for more chips, showing that, despite rival products, top industry players still prioritize Nvidia’s offerings.

Of course, as noted before, Nvidia may not maintain its recent triple-digit growth rates. Should there be a slowdown six months after the Blackwell launch, it would stem from the company’s already remarkable revenue levels, which make sustained high growth difficult. Thus, such a decline shouldn’t be viewed negatively.

Overall, it’s plausible that Nvidia may be striving to meet overwhelming demand six months post-launch. Forecasts predict the potential for billion-dollar revenue and robust earnings growth. This scenario could also enhance stock performance. Even if the shares do not experience the same dramatic rise as after the Hopper launch, Nvidia remains in a strong position for long-term investor gains.

Seize this Opportunity for Growth

Have you ever felt you missed out on investing in top-performing stocks? If so, this could be your chance.

Occasionally, our analysts propose a “Double Down” stock alert for companies poised for significant growth. If you’re concerned about having already missed an investment window, this is an opportune moment to buy before opportunities slip by. The past performance of other stocks illustrates this point:

• Amazon: A $1,000 investment in 2010 would now be worth $21,154!*
• Apple: A $1,000 investment in 2008 would now be worth $43,777!*
• Netflix: A $1,000 investment in 2004 would now be worth $406,992!*

Currently, we are issuing “Double Down” alerts for three outstanding companies, and opportunities like this may not arise again soon.

See 3 “Double Down” stocks »

*Stock Advisor returns as of October 21, 2024

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, 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. 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. Adria Cimino has positions in Amazon, Oracle, and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, Oracle, and Tesla. 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.

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