Prediction: Nvidia stock will rise sharply after November 20th

Nvidia (NVDA -1.86%) was a $360 billion company as of early 2023. In less than two years, its market capitalization rose to $3.5 trillion. Its ability to turn artificial intelligence (AI) into tons of money is the driving force behind this incredible growth.

Nvidia's data center graphics processing units (GPUs) are the most popular in the world for AI development, and demand continues to outstrip supply. As a result, the company's sales increased by a triple-digit percentage in each of the last five quarters.

On November 20th, Nvidia will report new financial results for the third quarter of fiscal 2025 (ending October 31st), and if past quarters are any indication, it could be an absolute blast. I expect the stock to react as follows once the results are announced.

The focus is on Nvidia's new Blackwell chips

Nvidia's flagship H100 GPU entered production in 2022 and was the first choice for AI data center operators in 2023. GPUs are designed for parallel processing, allowing them to handle multiple tasks simultaneously with very high throughput. They also have significant amounts of onboard memory, making them ideal for training AI models and performing AI inference.

According to Cathie Wood's ARK Investment, AI applications are expected to lead to a productivity boom worldwide that could generate up to $200 trillion in economic activity by 2030. Tech giants like Microsoft And Amazon fill their data centers with AI GPUs and rent the computing capacity to developers for a fee. It's a win for them, a win for Nvidia, and a win for the developers who don't have to spend billions of dollars on their own infrastructure.

Nvidia's H100 and newer H200 continue to enjoy strong demand, but the company's latest Blackwell architecture promises the biggest leap in performance yet. Blackwell-based GB200 GPU systems can perform AI inference at 30x the speed of equivalent H100 systems.

CEO Jensen Huang says individual GB200 GPUs will cost around $30,000 to $40,000, which is about the same price as the H100 when it first came to market.

In other words, Blackwell will drive incredible improvements in cost efficiency, making the most advanced large language models (LLMs) more financially accessible to a broader group of developers and companies.

Deliveries of the GB200 have already begun and will increase next year. By one estimate, Nvidia is on track to ship up to 200,000 individual GB200 GPUs in the last three months of 2024, and we already know that Microsoft is currently offering the new GPU to developers. Since Nvidia's third quarter of fiscal 2025 includes October, the upcoming report could include billions of dollars in GB200 sales.

What Wall Street expects from Nvidia's upcoming report

The company posted record revenue of $30 billion in the second quarter of fiscal 2025 (ended July 28), up 122% from the same period last year. This exceeded Wall Street's forecast of $28.7 billion. The result included $26.3 billion in data center revenue alone, representing 154% growth driven primarily by GPU sales.

The chip manufacturer also achieved strong bottom line results with earnings per share (EPS) of $0.68. That was a 152% increase, well above Wall Street's estimate of $0.64 per share.

Wall Street also underestimated Nvidia's forecast for the third quarter. The company told investors it expects total revenue of $32.5 billion, while The Street had forecast the figure at $31.7 billion.

Analysts have since revised their estimates upward to $32.9 billion (per Yahoo consensus), now suggesting that management's own forecast may be too conservative. We will know for sure on November 20th.

Nvidia stock could rise with the help of Q3 results

A stock's performance on any given day is just noise, but it's worth noting that Nvidia stock actually fell around 6% the day after it reported its second-quarter results in August. However, it has since risen 24% (as of this writing) and is now trading at a record high.

Since the beginning of last year alone, the share price has increased almost tenfold, so the long-term trend is crystal clear. If the company beats Wall Street's revenue estimate of $32.9 billion in its upcoming third-quarter report, I expect the stock to continue rising in the coming weeks and months.

Its valuation also supports upside potential in the medium term. Wall Street expects the company to generate earnings per share of $4.06 in fiscal 2026 (which begins in February 2025), giving the stock a price-to-earnings (P/E) ratio of 35.8 . That means the stock needs to rise about 90% next year to maintain its current P/E ratio of 68.1.

AP/E of 68.1 is compared to the market (the Nasdaq-100 trades at a P/E of 31.8), but Nvidia has traded at an average P/E of 58.4 over the past 10 years – and most of that period didn't even take into account the incredible tailwinds of AI. Therefore, strong upside potential can definitely be expected in the coming year as long as the company meets Wall Street's earnings estimates:

NVDA PE ratio; Data from YCharts.

Microsoft just told investors that it made $20 billion in capital expenditures (capex) in the first quarter of fiscal 2025 (which ended September 30), most of which went into data center infrastructure and AI chips raft. This followed $55.7 billion in capital expenditures in fiscal 2024. With Microsoft currently rumored to be the largest buyer of Blackwell chips, this bodes very well for Nvidia's financial results.

But Microsoft is not alone. Amazon is on track to spend over $75 billion on AI investments this calendar year Metaplatforms will spend up to $40 billion, with more money earmarked for 2025. The demand trend for Nvidia's GPUs is crystal clear and should support strong sales and profit growth for the foreseeable future.