Nvidia (NVDA): AI Chip Dominance Could Drive $37B Revenue in Q4

TLDR:

• Nvidia sees record stock levels despite Monday’s 2% decline to $144.69
• Analysts predict $34.5-37B revenue as new AI chip demand soars
• Blackwell chip launch faces supply constraints through 2025
• Price targets increased across Wall Street to $165-185 range
• Data center market share projected to reach 66% by 2025-26

Nvidia shares pulled back Monday, dropping 2% to $144.69, stepping down from last week’s record high as Wall Street analysts released a fresh round of upbeat forecasts ahead of the company’s upcoming earnings report.

The chip giant’s recent rally, which pushed shares to $148.88 last Thursday, paused just days after the company joined the prestigious Dow Jones Industrial Average. The stock’s year-to-date gains stand near 200%, adding to its impressive five-year return of 2,700%.

Market watchers expect robust third-quarter results when Nvidia reports on November 20. The consensus forecast calls for earnings of 70 cents per share, though some analysts project even stronger numbers. UBS analyst Timothy Arcuri expects quarterly revenue to hit $34.5 billion, with guidance for the following quarter potentially reaching $37 billion.

Supply chain reports indicate overwhelming demand for Nvidia’s upcoming Blackwell AI processors. The company previously stated that orders exceed manufacturing capacity, a trend expected to persist into 2025. This supply-demand imbalance has caught the attention of Wall Street firms, prompting a wave of price target increases.

Piper Sandler raised its target to $175, naming Nvidia its top large-cap pick. The firm points to Nvidia’s commanding position in AI accelerators, a market projected to reach $70 billion by 2025. Melius Research and UBS matched each other with $185 price targets, marking some of Wall Street’s most optimistic outlooks.

Data center growth remains a key driver for Nvidia’s expansion. Jefferies estimates that servers using Nvidia’s chips will represent 66% of data center demand in 2025-2026, before climbing to 80% in 2027. This projection comes as major tech companies plan substantial infrastructure investments.

A new revenue stream has emerged from government AI initiatives, dubbed ‘sovereign AI’ by Nvidia. Analysts estimate this segment could generate over $10 billion in 2024 sales, with some Middle Eastern nations matching the spending levels of major U.S. tech firms.

Morgan Stanley highlighted ongoing supply constraints affecting both the upcoming Blackwell chips and current H200 products while raising its price target to $160. Mizuho Securities followed suit, increasing its target to $165 while maintaining an outperform rating.

The company’s profit margins continue to impress investors, staying above 70% despite the competitive chip market. Nvidia’s current forward price-to-earnings ratio of 38.8 sits just below its five-year average, comparing favorably to competitors AMD and Broadcom, both trading around 30 times earnings.

Research firms point to several growth catalysts beyond traditional data center demand. The top five AI infrastructure spenders – Microsoft, Amazon, Meta, Google, and Oracle – are expected to increase their combined data center spending by 24% to $282 billion in 2025.

Melius Research drew parallels to Apple’s early iPhone days, suggesting that abandoning Nvidia after its successful Hopper chip launch would be like “giving up on Apple at iPhone 1 or 2.” The firm sees artificial intelligence applications still in their early stages, particularly in areas like text-to-video conversion, autonomous agents, and visual intelligence.

The upcoming earnings report may provide updates on Nvidia’s fourth-quarter Blackwell architecture launch. During August’s earnings call, management indicated strong pre-launch interest, with customer demand already exceeding initial production plans.