This One Thing Will Be Nvidia’s Biggest Growth Driver to Date

Nvidia‘S (NASDAQ: NVDA) earnings have already risen by triple digits — and that’s led to the stock’s stunning performance. The tech giant’s shares are up 2,500% over the past five years. And while the stock’s performance has slowed in recent weeks, the stock is still up about 120% since the start of the year.

The reason for this growth is simple: Nvidia has secured a significant position in one of the hottest growth markets: artificial intelligence (AI). The company owns 80% of the AI ​​chip market thanks to the incredible performance of its graphics processing units (GPUs). These chips handle key AI tasks, such as training and inferring large language models (LLMs).

Now, as other chipmakers launch products that rival Nvidia’s top chip, some investors wonder if Nvidia’s biggest growth wave has ended. But I predict one thing in particular will be Nvidia’s biggest growth driver — and it’s just around the corner. Let’s find out more.

Nvidia and Artificial Intelligence

First, a quick note about Nvidia’s path to this point. A few years ago, the company was a giant in the video game market, its GPUs bringing games to life on screen for gamers. But it became clear that Nvidia’s GPUs could be valuable across a range of industries for a variety of applications—especially AI. The tech company decided to focus on this rapidly growing industry, designing GPUs for those building AI platforms.

And Nvidia didn’t stop at GPUs. The company designed an entire ecosystem of products and services for AI, making it a supplier of the best chips and more. Market giants like Meta Platforms AND Teslaare major customers. During Tesla’s recent earnings call, CEO Elon Musk said, “I’m incredibly impressed with Nvidia’s execution and the capabilities of their hardware. And we’re seeing demand for Nvidia hardware be so high that GPUs are often hard to come by.”

So it’s clear that Nvidia’s growth is far from over. But can it really even stronger? I think so. What could spur the next era of even greater growth is the upcoming launch of the Blackwell architecture and processor.

The Blackwell architecture includes six breakthrough technologies, from being the most powerful chip yet to features that offer improved security, reliability, and the highest performance for data analytics. In Nvidia’s first-quarter earnings report, the company said that Blackwell is in full production — with the goal of making it available worldwide later in the year. At this point, similar to Elon Musk’s recent words about Nvidia GPUs, the company said that demand is outstripping supply. Nvidia expects that trend to continue into next year.

The story continues

While Nvidia is working tirelessly to get its GPUs to those who need them, CEO Jensen Huang stressed that meeting such high demand is difficult.

‘A lot’ of Blackwell revenue

All of this suggests that Nvidia’s growth is far from over. And the fact that Blackwell is offering such performance improvements—for example, enabling companies to run generative AI on LLM at a cost and power consumption that’s up to 25 times lower than its predecessor—suggests that growth could start to take off. Nvidia’s Huang says the company expects “a lot” of revenue from Blackwell this year.

What does this mean for investors? Nvidia stock isn’t cheap, trading at 39 times estimated earnings, but given Nvidia’s history and the upcoming Blackwell launch, that valuation is reasonable. Even if Nvidia’s stock doesn’t skyrocket immediately, it’s clear there’s plenty of gas in the tank to keep earnings up over the long term.

I predict Blackwell will be key to the next era of massive growth for Nvidia. It’s worth staying or investing in the recent stock decline to potentially benefit from this exciting story.

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Randi Zuckerberg, former chief market development officer and spokeswoman for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Adria Cimino holds positions in Tesla. The Motley Fool holds positions in and recommends Meta Platforms, Nvidia, and Tesla. The Motley Fool has a disclosure policy.

Prediction: This One Thing Will Be Nvidia’s Biggest Growth Driver Yet was originally published by The Motley Fool