yet, Nvidia‘s (Nasdaq: NVDA) Business has been thriving for so long that it has become boring. As of the time of writing, shares are down about 3% despite better-than-expected third-quarter earnings and a booming market for artificial intelligence (AI) devices.
But how long can the momentum last? Let’s dive deeper into what could happen in the next three years She has in place.
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Despite being the world’s largest company with a market cap of $3.6 trillion, Nvidia’s business is still growing like a startup. Third-quarter revenue rose 94% year over year to $35.1 billion, beating analysts’ expectations of $33.2 billion. The momentum was driven by its data center business, where it sells advanced products Graphics processing units (Graphics Processing Units) to run and track artificial intelligence algorithms.
Nvidia also has tremendous pricing power, with a gross margin of about 75%, which suggests that He saved Competition in the Gulf. Management plans to sustain growth through new product releases, such as Blackwell-based AI chips, which are expected to provide significant performance improvements over previous generation GPUs.
However, while the results have been impressive, investors should note that Nvidia’s growth is slowing. During the previous three quarters, sales increased by 122%, 262% and 265%, respectively. This slowdown is likely to continue as the company faces more difficult comps over the next three years.
Analysts remain optimistic about the future of the AI industry, with Bain & Co. forecasting it will generate revenues of $990 billion by 2027 — compared to just $185 billion last year. They believe that as companies move out of the pilot phase to begin scaling AI technology into their operations, huge demand could strain supply chains and cause shortages. If this happens, Nvidia actually Huge margins may rise.
However, analysts made similar predictions during the dot-com bubble in the early 2000s. While the Internet turned out to be a world-changing success, its widespread adoption did not come as quickly as expected. There are growing signs that something similar could happen to artificial intelligence.
according to The EconomistHowever, the disparity between investor enthusiasm about AI and reality may be untenable. They reported that only 5% of US companies say they use AI in their products and services, and that few AI startups are profitable. It is worth noting that OpenAI, the creator of ChatGPT, expects to lose about $5 billion this year due to huge inflows of employee salaries and huge energy costs associated with operation. Large linguistic models (Master of Laws).
In the best-case scenario, Nvidia can continue to make newer, more efficient chips that can perform more computational work with lower power requirements. This could reduce the costs of training and running AI models. But there are still many other variables, such as competition among LLM holders, which can make the software side of the industry unprofitable, even if operational costs begin to decline.
all in allThe AI opportunity seems more speculative and uncertain than the most optimistic analysts let on.
Over the next three years, investors should expect Nvidia’s growth and margins to decline as investors become more realistic about the timelines needed to bring AI technology into the mainstream. However, it appears that the stock’s valuation has already hit these headwinds. together Forward price to earnings (P/E) of 37, the company’s shares look reasonable compared to its aggressive growth rate, so the potential downside is limited.
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Will Epifong He has no position in any of the stocks mentioned. The Motley Fool has positions on and recommends Nvidia. The Motley Fool has Disclosure policy.
Where will Nvidia stock be in 3 years? Originally published by The Motley Fool