NVIDIA's AI-driven growth is surging, with sales hitting a $150 billion annual run rate despite supply constraints and production delays with new Blackwell GPUs.
The company is reporting unsustainable margins that will normalize over the long term; however, current momentum suggests further upside over the next 1 to 2 years.
The stock should have more upside based on the cheap valuation compared to growth rates with the stock only trading at 31x FY26 EPS targets.
The world continues to charge into AI data center demand that NVIDIA Corporation (NASDAQ:NVDA) (NEOE:NVDA:CA) has easily hurdled a couple of apparent hiccups with their new Blackwell GPUs. The chip company will face major long-term margin compression, but for now, the business should charge ahead. My investment thesis remains Bullish, with the market somewhat fighting the expected strong results ahead.
Still Supply Constrained
Nvidia just reported a quarter where sales grew an astonishing $5 billion sequentially. The GPU company reported revenues of $35 billion, beat consensus estimates by nearly $2 billion.
The company had only reported a sequential quarterly beat of $4 billion in FQ2 to reach $30 billion after hitting $26 billion in FQ1. Nvidia shows no signs of slowing down, despite apparent manufacturing issues with the new Blackwell GPUs and issues with ongoing supply constraints.
The incredible part is that Nvidia went into the FQ2 earnings report back in September with guidance for revenues of $28 billion and ended the recent quarter with guidance for FQ4 sales of $37.5 billion. Within a 3-month period, quarterly sales exceptions surged to nearly $10 billion.
The GPU company is growing at unprecedented levels for a company now hitting an annual run rate of $150 billion in sales. Nvidia has grown trailing data center revenues 6-fold in just a couple of years, with quarterly revenues now double prior annual revenues.
The interesting part of the story is that the new Blackwell GPUs are so complex, investors shouldn't have really been surprised with any production delays. The Blackwell GPU is a marvel of modern chip design with 208 billion transistor manufactured using a custom-built TSMC 4NP process.
The big hyperscalers have apparently ordered a massive amount of the GB200 chips. Google (GOOG) has ordered 400K chips valued at $10 billion, while Meta Platforms (META) ordered 360K chips for $8 billion. Regardless of these volume levels, Morgan Stanley recently reported Blackwell chips were already sold out for the next 12+ months.
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Comments
Always bullish on NVDA