Nvidia (NVDA +1.73%), the producer of the world's most powerful artificial intelligence (AI) chips, has been at the forefront of the AI revolution. Customers have piled into these top graphics processing units (GPUs) for the crucial AI tasks of training and inferencing of models. So Nvidia plays a key role in helping customers at the earliest stages of their AI journey.
On top of this, the company has developed an entire portfolio of AI products and services to accompany customers through every stage of their AI programs. All this has helped the tech giant deliver double- and triple-digit quarterly revenue in recent years and has sent revenue to record levels. And Nvidia, maintaining gross margin above 70%, has delivered strong profitability on sales.
The great news is this success story may be far from over. Nvidia chief executive officer Jensen Huang, speaking at CES earlier this month, said AI is progressing at an "incredible pace." Considering this, where will Nvidia stock be in one year? Let's find out.
Image source: Getty Images.
The go-to player for AI
First, let's consider the story so far. Nvidia got in early on AI, establishing itself as the go-to player for any company interested in setting up a program. Initially, the tech powerhouse was known for its GPUs, but it quickly expanded into a range of products and services, from networking equipment to enterprise software. And it's even developed expertise in various industries, such as healthcare and automobiles, to offer specific platforms tailored to their needs.
Nvidia has benefited as data centers launched upgrades, requiring new GPUs, and companies got their feet wet in AI, training models or developing initial projects.
Now let's look to the future. Nvidia should continue to gain from these trends, as they're far from over. Huang has said about $1 trillion in outdated computers exist in the world -- and need to be upgraded for accelerated computing. It's also important to keep in mind that most companies that have started to incorporate AI into their businesses still have much farther to go -- offering Nvidia an ongoing revenue opportunity.
For example, the next wave of AI growth may be agentic AI, or the development of AI software to consider complex problems, reason, find solutions, and apply those solutions. Nvidia is launching blueprints that make it easy for customers to design their own AI agents -- and Nvidia partners also have created blueprints that integrate with Nvidia software.
NASDAQ: NVDA
Key Data Points
The Blackwell rollout
Over the coming year, we should expect a complete rollout of Nvidia's much-anticipated Blackwell architecture, a fully customizable platform featuring seven different chips, multiple networking options, and more. The production ramp has been happening now, in the fourth quarter of the current fiscal year, and Nvidia expects billions of dollars in Blackwell revenue during this period.
The next big launch is also on the horizon. A report in ZDNet Korea suggests Nvidia's next-generation architecture Rubin, originally set for launch in 2026, could start initial shipments as early as the third quarter of this year.
Meanwhile, companies aiming to apply AI to their businesses could turn more and more to this AI leader. For instance, Nvidia, launching its latest car computer at CES, spoke about how the autonomous vehicle industry may become the first multitrillion-dollar robotics industry -- and Nvidia already works with all the leading automotive players.
Nvidia may see some pressure on gross margin in the early stages of big platform launches such as Blackwell or Rubin -- the company said that in the current quarter, as it ships Blackwell, gross margin may dip into the low-70% range from the mid-70%. But these new products also should serve as big revenue drivers from the very first quarter of commercialization.
All this should continue to drive strong earnings growth in the quarters to come. Will the stock price follow?
Today, Nvidia shares trade for about 46x forward earnings estimates. This isn't cheap, but it's down from more than 75x back in 2022, and it isn't ridiculously expensive, considering Nvidia's growth opportunities and earnings track record. So Nvidia's stock has room to run from today's level, meaning that, after two years of gains, it could easily climb in the double digits to score yet another win for investors over the coming year.
