NVIDIA Corporation (NVDA) has once again surprised analysts with its third-quarter earnings, reporting a remarkable revenue of $35 billion. This figure marks a significant 94% increase when compared to the same quarter last year and a 17% rise from the previous quarter. The adjusted earnings per share (EPS) came in at $0.81, exceeding expectations of both revenue and EPS, which were forecasted at $33.2 billion and $0.74, respectively.
This upward trend raises the question of why analysts consistently underestimated NVDA’s performance. To understand this, we need to look back at the previous quarter’s earnings. Last quarter, NVDA’s shares were trading at $125, and the company had reported a revenue of $30 billion, a remarkable 122% year-over-year growth. At that time, NVDA had anticipated a revenue of around $32.5 billion for the current quarter. Following the announcement, NVDA shares initially dipped to $101 but surged to close at over $145 today, reflecting a 16% return over three months, which closely aligns with its quarter-over-quarter revenue growth rate of 15%.
Just hours ago, NVDA reported that it achieved $35.1 billion in revenue, surpassing its prior guidance of $32.5 billion. This impressive revenue growth rate accelerated from 15% to 17%, and the company has projected revenue of $37.5 billion for the upcoming quarter. Such projections suggest that NVDA may exceed $40 billion in quarterly revenue, leading to expectations that its share price could rise another 16-17% in the next three months, potentially reaching $170. Demand for NVDA’s chips shows no signs of slowing down.
As the co-founder and research director of Insider Monkey, I have been advocating for a long position in NVDA since May 2023, and the stock’s performance has benefited our subscribers. Personally, I hold a small position in NVDA shares. I maintain a positive view that NVDA will continue to outpace market trends in the near term. However, caution is warranted regarding long-term investment potential. Currently, NVDA’s market capitalization is almost $3.6 trillion, and if projections hold true, it may exceed $4 trillion in just three months. This projection indicates that investors anticipate NVDA to generate earnings of approximately $200 billion annually, akin to more mature companies like Alphabet Inc (GOOGL), which trades at a forward price-to-earnings (P/E) multiple of 20. The big question remains: Is it plausible for NVDA’s quarterly profit to escalate from the current $19.3 billion to $50 billion in the coming years while maintaining a growth rate similar to GOOGL’s?
While NVDA’s prospects as a short-term AI investment look promising, I believe there are other AI stocks that could yield higher long-term returns. For those seeking an AI stock with substantial potential that trades below five times its earnings, I recommend exploring our report on the most affordable AI stock options.
This optimistic analysis of NVIDIA’s capabilities is encouraging for investors, especially those looking for substantial short-term gains while remaining aware of the overall long-term market dynamics. The tech industry continues to evolve, and NVIDIA’s leading position in the AI market signals a bright, lucrative future ahead.