Predicting the future position of Nvidia's stock within a year is a speculative task.
Everybody's eyes are on Nvidia's (NVDA -1.22%) impending earnings. On Nov. 20, we'll have an opportunity to listen directly from the leaders of the company at the epicenter of the artificial intelligence (AI) boom. There are some crucial questions I'd like answered, such as how the recent events at Supermicro might impact Nvidia's capacity to release its brand-new Blackwell chips promptly and meet demand.
Talking about Nvidia, CEO Jensen Huang referred to the demand as "crazy." The figures for the third quarter will reveal if this demand is truly so insane. The stratospheric expectations Wall Street has set for the company signify that the degree of craziness is crucial. "Strong" will no longer suffice at this point.
While we're waiting for Nov. 20, let's examine potential scenarios for Nvidia a year from now.
A flawless Blackwell launch is paramount
Wall Street's expectations for Nvidia are off the charts. Whilst Huang's public statements tend to stoke this flame, there's no denying that the company's stock price still relies on continued success, trading at a lofty 51.8 times forward earnings. Here's a chart that illustrates this relationship against some of tech's heavyweights.
Nvidia must maintain its rapid expansion, or its stock price might begin to plateau. To achieve this, the company must excel at every opportunity -- a skill it's demonstrated time and again. The most significant upcoming challenge comes with the launch of Blackwell, the latest version of its flagship AI chip.
Earlier this summer, there were rumors of fabrication issues that Nvidia managed to resolve, but now the company is confronted with another challenge: Supermicro, a pivotal component of Nvidia's supply chain. Supermicro has been under investigation for misconduct, and now Nvidia is reportedly looking for alternatives. Nvidia seems to be addressing this issue, but the ultimate effect on Blackwell supply is yet to be seen.
surpassing Moore's Law
Moore's Law -- the notion that computer processors double in speed every two years -- has served as the cornerstone of Silicon Valley for decades. Of late, though, the law's longevity has been questioned. Chipmakers were nearing the limit of how many transistors could fit in a circuit -- the primary driver of Moore's Law.
However, that paradigm might be outdated. At least Huang believes it is. Nvidia has introduced the concept of "accelerated computing," wherein enhancements in speed and efficiency stem from various factors, including networking, algorithms, software, and data center design – rather than relying on the solitary constraint of transistors in a circuit. Huang recently posited that this could usher in "Hyper Moore's Law," where speed "doubles or triples every year."
It's a bold declaration. If it proves to be accurate, the modern AI boom could be far more significant than anticipated. It's a big "if," and remember, CEOs often make outlandish predictions that aren't always realized.
stock buybacks could bolster the value
In August, Nvidia announced that its board had approved an additional $50 billion for stock buybacks after it had already bought back $15.1 billion during Q1 and Q2. I'm eager to see the extent of the capital the company allocates and whether executives will confirm a continuation of these buybacks. Buybacks are typically excellent for investors. However, the caveat here is that the market may have already factored this development into Nvidia's share price. If the Q3 figures show a lackluster repurchase, Nvidia's stock price could decline.
a year from now
I'm compelled to reaffirm that the future is unpredictable. It's simple to get carried away by the excitement surrounding a stock like Nvidia. Nevertheless, all signs suggest a smooth Blackwell launch, followed closely by the debut of Rubin – Blackwell's successor.
I believe Nvidia will once more outperform the market and deliver impressive returns.
In light of the upcoming Blackwell launch, Nvidia's success in overcoming any challenges related to Supermicro could significantly impact its ability to meet demand and boost its finances through increased investing opportunities. With high expectations from Wall Street, a flawless launch could help maintain the company's stock price momentum.
Furthermore, Nvidia's strategy to focus on "accelerated computing" instead of solely relying on Moore's Law could potentially revolutionize the AI industry and elevate its financial prospects in the long run. Successfully surpassing what is currently considered the limit of transistors in a circuit could lead to unprecedented growth, making Nvidia an appealing investment for finance enthusiasts.
