MW Nvidia continues its inevitable march to a $4 trillion stock-market valuation
By Daniel Newman
Two big questions: How does the tech giant grow fast enough to satisfy Wall Street - and how long will that take?
Perfect never seems to be enough when it comes to Nvidia.
Despite some quibbling and handwringing over Nvidia's $(NVDA)$ latest earnings report earlier this week, the tech powerhouse continues its inevitable march to a $4 trillion valuation.
It's hard to find much not to like about Nvidia's third-quarter earnings results. Expectations were sky-high and some fatigue may have crept in over Nvidia's rocket-like trajectory but make no mistake: this was a remarkable quarter, burnished by fantastic execution and a sound plan. In fact, Nvidia is in an extremely strong position, highlighted by several developments.
The key question among analysts is can Nvidia grow into a $4 trillion company, a feat that will require much more than just Blackwell, data centers and a road map.
To get there, major cloud providers need to keep capex spending going, Nvidia continues its gains in automotive (revenue in that category was up 70% year-over-year) and gaming, benefit from the promise of AI PCs - even a have a chance to play in a big moat such as Tesla's $(TSLA)$ fledgling humanoid robot market that CEO Elon Musk pegs as a multitrillion-dollar opportunity.
Blackwell, the company's newest graphics processing unit microarchitecture, is ramping nicely. Demand should exceed supply for several quarters in fiscal 2026.
Production of Blackwell, the company's newest graphics processing unit microarchitecture, is ramping nicely for the fourth quarter, and demand should exceed supply for several quarters in fiscal 2026. (That is a good problem to have.) Meanwhile, demand for Hopper remains strong.
Fourth-quarter revenue guidance, at $37.5 billion is up, and getting closer to what Wall Street analysts expect. (They are modeling $37.1 billion, with a high estimate of $41 billion.) Cash reserves doubled to $38.5 billion, and with a potentially warmer climate for big M&A deals under the coming Trump administration, that war chest could be put to use.
None of the big spenders - Alphabet's Google, Microsoft and Amazon.com - want to fall behind in the AI race.
Quarterly guidance has been, and continues to be, the litmus test for the market. People's experience can be conflicted with results. Perfect never seems to be enough when it comes to Nvidia.
At the same time, some people fear capex spending for the largest five- to 10 companies buying the data center product is hitting a point (more than $50 billion each annually) where there is concern if they can maintain 50% growth projections.
But none of the big spenders - Alphabet's Google $(GOOGL)$, Microsoft $(MSFT)$, Amazon.com $(AMZN)$ - want to fall behind in the AI race, which puts Nvidia in an extremely strong position. (Each of these mega-customers is building its own infrastructure and hardware, and could eventually emerge as competitors, prompting Nvidia to diversify its business.)
Trump, Taiwan and AI's future
There is no way the U.S. can continue to lead the world in AI innovation unless there is a strong partnership between Nvidia and Taiwan Semiconductor Manufacturing.
Of course, there are wild cards, such as how the incoming administration of President-elect Donald Trump will impact relations with Taiwan, and how that will impact Nvidia.
From a fab and foundry standpoint, Taiwan Semiconductor Manufacturing Co. (TSMC) $(TSM)$ has more demand from Nvidia than it can handle. The China-Taiwan complexity is real because there will be stricter U.S. policy toward the region, and the U.S. is talking about tariffs - but the U.S. just announced $6 billion-plus in grants to allow TSMC to build more capacity in the U.S.
Having said all that, it's likely that Trump will be cautious about anything that creates consternation in the markets. To do anything that causes meaningful concerns would be problematic for the Trump administration. By the same token, building out manufacturing in the U.S. takes time, and is difficult to do on a whim.
The relationship between Nvidia and TSMC is symbiotic. There is no way the U.S. can continue to lead the world in AI innovation unless there is a strong partnership between the two companies. To break that in any meaningful way could seriously harm the market, and I don't see Trump jeopardizing it. It's also likely that global technology leadership will be a focus of the U.S. Treasury Department in the Trump administration - and that portends a delicate dance of microaggressions between the U.S. and China over AI dominance.
Daniel Newman is CEO and chief analyst at The Futurum Group, which provides or has provided research, analysis, advising or consulting to ServiceNow, Intel, Nvidia, Microsoft, Amazon.com, IBM, AMD and other technology companies. Neither he nor the firm have any positions in any of the companies cited. Follow him on X @danielnewmanUV.
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-Daniel Newman
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November 22, 2024 07:21 ET (12:21 GMT)
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