About the Company
Nvidia is an American tech giant that specializes in the production of graphics processing units (GPUs), previously primarily used in video games, but thanks to their high performance, they now serve a wide range of fields such as data centers for AI, machine learning or autonomous driving. Nvidia has been one of the fastest growing companies in the world in recent years, with its stock strengthening significantly and sustainably as demand for AI-based products grows.* Its strong position in the GPU market, huge lead over its competitors and constant innovation make Nvidia a key player in its industry.
Nvidia doesn't just make hardware, it also has its own AI models
The company recently unveiled its new AI model, Fugatto, which can generate music, sounds, and modify voice to other sounds. Despite being primarily a hardware development company, Nvidia also has a number of different AI models for different purposes[1], and with this news it joins companies like Runaway or Meta that have their own tools with similar features. However, Nvidia has no plans to make Fugatto publicly available yet, as it is still evaluating the possible risks of its potential misuse for misinformation and fraud. Developers tend to be very cautious when releasing such tools, as there are many unanswered questions about, for example, copyright compliance in generative AI in legislations that have not kept up with the same breakneck pace of these technologies.[2]
Blackwell as an important product for future growth
Nvidia has built a reputation in recent years through its powerful data centre chips capable of running even the most complex AI models. One such next-generation product is Blackwell, which was recently put into mass production, and is set to replace the previous generation Lovelace from 2022. According to the company, the new processor is up to 25 times more powerful while being less power-hungry than its predecessor. Time will tell if these claims are true. In the past quarter, Blackwell's production has not yet reached the required levels, which was mainly related to technical issues and proper optimization. Nvidia's chip production is mainly the responsibility of the leading Taiwanese firm TSMC (Taiwan Semiconductor Manufacturing Company), which claims that its capacities are currently fully filled. Nvidia may therefore face demand it cannot meet next year. However, TSMC has stated that it will increase its capacity.
and should double next year. Blackwell is now one of Nvidia's main products, and investors have high expectations for its share of future sales.[3][4]
Economic results
On November 20, 2024, Nvidia released its results for the third quarter of fiscal year 2025 (the period from July 29 to October 27, 2024). These indicate that impressive growth continues as total revenue reached $35.1 billion, up 94% on the same period last year. Net profit saw a massive increase, up 109%, to US$19.3 billion. Despite such impressive numbers, the company's gross margins declined, mainly due to the increased cost of manufacturing the aforementioned Blackwell processors, while the volume of shipments was not yet enough to be reflected in profits. However, data centres still accounted for the largest share of total revenues, with 112% year-on-year growth in this segment on revenues of USD 30.8 billion. Nvidia is also expanding its reach into the automotive industry, with advanced technology being placed in new vehicles using increasingly advanced chips, for example for autonomous driving or other automated safety features to assist drivers. Compared to last year, the company's revenue from this segment has strengthened by 72%.
Growth will slow in the next quarter
Nvidia's outlook for the next quarter, however, has caused investors a slight disappointment as the company is not yet counting on such huge revenue growth in the future. In the next quarter, it forecasts revenue of roughly $37.5 billion and gross margins of 73% to 73.5%, the slowest growth in seven quarters. This does not mean that Nvidia is in for tough times, on the contrary, demand is set to continue to increase, but triple-digit growth in any accounting period is highly unlikely in the long run and so it is understandable that it will slow down to some extent.[5][6] [1]
Nvidia's share price evolution over the last 5 years. (Source: Google Finance)*
Conclusion
Nvidia continues to dominate the technology sector with impressive growth and innovation in artificial intelligence and data centers. Although the pace of revenue growth is expected to slow in the coming quarters, its latest product, Blackwell, is key to maintaining a strong position in the market. The company continues to innovate and expand its footprint. Investor expectations also remain high due to growing demand for AI solutions and technologies, meaning Nvidia will continue to have a significant impact on the future of technology. [2]
Adam Austera, Principal Analyst at Ozios
* Past performance is no guarantee of future results.
[1], [2] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or the current economic environment, which may change. Such statements are not guarantees of future performance. They involve risks and other uncertainties that are difficult to predict. Results may differ materially from those expressed or implied by any forward-looking statements.
[1] https://developer.nvidia.com/ai-models
[2] https://www.investing.com/news/stock-market-news/nvidia-shows-ai-model-that-can-modify-voices-generate-novel-sounds-3739657
[3] https://www.forbes.com/sites/johnwerner/2024/11/25/whats-so-great-about-nvidia-blackwell/
[4] https://www.investing.com/news/analyst-ratings/nvidia-shares-poised-as-blackwell-chip-outlook-brightens-93CH-3735636
[5] https://nvidianews.nvidia.com/news/nvidia-announces-financial-results-for-third-quarter-fiscal-2025
[6] https://www.investing.com/news/stock-market-news/ai-chip-leader-nvidia-forecasts-fourthquarter-revenue-above-estimates-3733390
