Nvidia's Growth Outlook: Accelerated Demand and Strong Earnings

According to analysts at Redburn Atlantic, accelerated computing power and demand from various sectors are driving growth for Nvidia (NASDAQ: NVDA).

In their client note, analysts led by Timm Schulze-Melander expressed that these trends position Nvidia to maintain a "sustainable" 65% earnings before interest and taxes (EBIT) margin. They project a compound annual growth of 38% in per-share income from this year through 2030.

The analysts initiated coverage of Nvidia’s stock with a "Buy" rating and set a price target of $178.

With Nvidia set to report quarterly results on Nov. 20, investors are keen on guidance regarding demand for AI-enhancing hardware leading into 2025. Recent sentiment suggests that the significance of Nvidia’s earnings report rivals that of the US jobs report or consumer price data.

As a semiconductor manufacturer essential for training and deploying AI applications, Nvidia has become central to the fervor surrounding artificial intelligence technology. Its stock has jumped over 200% this year, significantly influencing the US stock markets, particularly the S&P 500, which has greatly benefited from Nvidia’s gains.

Major tech corporations like Alphabet (NASDAQ: GOOGL) and Amazon (NASDAQ: AMZN) are significant customers of Nvidia, investing heavily in its products to support their AI initiatives. Consequently, Nvidia's earnings are seen as an indicator of the health of the AI boom, amid growing investor calls for validated returns on extensive AI investments.

In August, CEO Jensen Huang noted that demand for Nvidia's current-generation Hopper chips remains strong. However, the company's guidance for third-quarter revenues of $32.5 billion, plus or minus 2%, was only marginally above Wall Street's expectations, indicating that even a small miss could disappoint investors due to Nvidia’s history of exceeding forecasts.

CFO Colette Kress outlined the production timeline for Nvidia's next-generation Blackwell chips, revealing that output, previously delayed, is expected to ramp up in the fourth quarter and continue into Nvidia's 2026 fiscal period. Kress projected several billion dollars in Blackwell revenue for Q4.