Nvidia (NASDAQ: NVDA) is the leading supplier of cutting-edge graphics processing units (GPUs) essential for developing artificial intelligence (AI) models. As some of the world’s largest tech companies invest heavily in data centers, eager to claim dominance in the AI race, Nvidia has seen tremendous growth in its data center revenue. This growth, which has been in the triple-digit percentage range for the last six quarters, has raised questions from Wall Street analysts about how long the AI spending boom can last.
In response to these concerns, during Nvidia’s third-quarter fiscal 2025 earnings call (for the period ending Oct. 27), CEO Jensen Huang addressed the skepticism and offered insights into the increasing demand for its latest GPU architecture, Blackwell, which has the potential to excite investors.
Blackwell’s Game-Changing Technology
AI development is a costly endeavor. A single GPU for a data center can cost upwards of $40,000, and large-scale AI models often require tens of thousands of these chips. For the past year, Nvidia’s H100 and H200 GPUs, built on the Hopper architecture, have been the preferred choice for AI development, offering industry-leading performance and energy efficiency. However, Nvidia’s new Blackwell architecture promises even greater advances.
The Blackwell-based GB200 NVL72 system, for example, delivers AI inference speeds 30 times faster than the equivalent H100 system, while also offering similar energy efficiency improvements. This leap translates into significant cost savings for data center operators like Microsoft and Amazon, as well as the AI developers renting computing power from them.
While a single GB200 GPU is priced at around $83,333—double the price of the H100 at launch—its performance and efficiency improvements make it a more cost-effective option for AI developers, despite the higher initial cost. The Blackwell architecture’s transformative capabilities make advanced AI models more accessible to a broader range of businesses and developers.
Blackwell’s Future Impact on Nvidia’s Revenue
In the third quarter of fiscal 2025, Nvidia generated $30.8 billion in data center revenue, marking a 112% year-over-year increase. Although only 13,000 sample Blackwell GPUs were shipped to customers in this period, the sales of these new chips are expected to ramp up significantly in the coming months.
Microsoft has reportedly been the biggest customer of Blackwell GPUs so far, with its AI infrastructure investments contributing to the company’s $20 billion in capital expenditures for Q1 fiscal 2025. Similarly, Amazon’s AI capex is on track to reach $75 billion in 2024, while Meta Platforms plans to spend up to $40 billion on AI this year. Oracle is also investing heavily, planning to build clusters with 131,000 Blackwell GPUs. These investments indicate a strong demand for Blackwell GPUs, with potential for Nvidia to generate billions in sales over the coming years.
However, some analysts, including those from Goldman Sachs, have expressed caution about the long-term sustainability of such massive AI investments. They argue that while AI-related spending is high, there is still no “killer app” driving it, and if these investments only lead to incremental improvements like customer service chatbots, tech companies might be overspending.
Huang’s Reassurance: No Slowdown in Sight
Despite these concerns, Nvidia’s leadership remains optimistic about future growth. During the same earnings call, Huang described the demand for Blackwell GPUs as “staggering” and stated that the company is likely to exceed its earlier estimate of generating “several billion dollars” in Blackwell-related revenue in Q4 2025.
Huang further addressed the potential for a slowdown, saying he does not anticipate any reduction in AI spending until the $1 trillion worth of existing data centers are fully modernized with new GPUs over the next few years. This suggests that Nvidia’s sales could continue to grow steadily through 2030, with demand remaining strong as companies upgrade their infrastructure.
Morgan Stanley also remains bullish on Nvidia’s prospects, projecting that Microsoft, Amazon, Meta, and Alphabet will spend a combined $300 billion on AI infrastructure in 2025 alone. The firm predicts Nvidia will ship up to 300,000 Blackwell GPUs in Q4 2024, followed by up to 800,000 in Q1 2025, further solidifying the company’s position as a key player in the AI race.
Long-Term Outlook for Investors
For Nvidia investors, the outlook remains strong. Even though some analysts are cautious, the company’s dominance in the AI space, especially with Blackwell, suggests solid future growth. Current investors should consider holding their positions, as the long-term growth potential is significant. For those considering entering the stock, now may still be a good time to invest in Nvidia’s impressive growth story.
A Lucrative Opportunity for Investors
If you’ve ever worried you missed out on investing in successful companies, now may be your chance. The Motley Fool’s expert team occasionally issues “Double Down” stock recommendations for companies poised for growth, and Nvidia is a prime example.
Take a look at the success of past recommendations:
Nvidia: A $1,000 investment in 2009 would be worth $368,053 today.
Apple: A $1,000 investment in 2008 would be worth $43,533 today.
Netflix: A $1,000 investment in 2004 would be worth $484,170 today.
Currently, Nvidia is among the companies receiving “Double Down” recommendations, and it could be a chance for new investors to seize a potentially lucrative opportunity before it’s too late.
Disclosure: The Motley Fool has no position in any of the stocks mentioned. It recommends Nvidia, Alphabet, Amazon, Meta Platforms, Microsoft, Oracle, and Goldman Sachs Group. The Motley Fool has a disclosure policy.
