Nvidia stock: 3 reasons the AI superstar can move higher in Q4

The AI-chip leader's stock price could hit another all-time high in the fourth quarter.

| More on:
Boys making faces and flexing.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

In case you had forgotten that the stock market still belonged to Nvidia (NASDAQ: NVDA), its CEO, Jensen Huang, reminded investors in a CNBC interview last week.

Demand for Nvidia's new Blackwell chip is "insane," he said, adding, "It [Blackwell] gives us an opportunity to triple down, to really drive the innovation cycle so that we can increase capabilities, increase our throughput, decrease our costs, decrease our energy consumption."

While the Blackwell platform is highly anticipated by both Nvidia's customers and the investor community, the AI chip pioneer's stock has been stuck in neutral for the past few months after it peaked in June.

Huang's latest comments helped spark a gain in Nvidia stock, but these three catalysts could power the stock even higher in the fourth quarter.

1. Macroeconomic conditions are looking stronger

Lately, Nvidia has been largely immune from the vicissitudes of the macro-level economy. The company has reported five straight quarters of triple-digit percentage revenue growth as it tries to fill seemingly insatiable demand for its AI components.

While it's unlikely that either the Federal Reserve's interest rate cuts or the strong September jobs report will directly impact Nvidia's business, they should influence investor perception of the stock and valuation models related to it, as well as the capital expenditures of its key customers.

In other words, lower interest rates should help loosen the purse strings of companies investing in AI, and increasing confidence in the strength of the economy will also quell doubts about the AI boom, as the two trends can reinforce each other in a virtuous cycle. Additionally, lower interest rates tend to lead to higher valuations for growth stocks like Nvidia due to the nature of the discounted cash flow model. That alone could add buoyancy to the stock price.

2. AI events could trigger gains

Excitement for generative AI and its potential applications continues to build as the technology advances and companies deploy new products like Meta Platforms' new generative AI photo editor. The latest round of funding for OpenAI, which included an investment from Nvidia and valued the start-up at $157 billion, also shows that expectations for generative AI continue to grow.

Building on that momentum, there are a number of AI events scheduled in Q4 that could drive Nvidia stock higher. For instance, the AI summit Nvidia is hosting from Monday through Wednesday of this week will include presentations and live demos on topics like generative AI, remote sensing, robotics, industrial digitisation, and beyond. The company isn't expected to release new products at the conference, but favorable responses from industry insiders could drive the stock higher, as could other surprise announcements.

The most anticipated AI-related event of the quarter is probably Tesla's robotaxi event, which is scheduled for Thursday. It's unclear what Tesla will unveil, but CEO Elon Musk has been talking up the idea that robotaxis will be transformative for his company for years now, so expectations are high.

Importantly, Tesla's self-driving systems rely on Nvidia's AI hardware, and Musk has sung the company's praises on several occasions. Autonomous vehicles could be the next major frontier for Nvidia and AI, and Huang said in an interview in May that Tesla was "far ahead in self-driving cars."

3. The Blackwell money is about to roll in

It will likely take a lot to impress Nvidia investors at this point, but Blackwell has yet to factor into the company's financial results. JPMorgan recently reaffirmed its expectations that Nvidia will generate several billion in sales from Blackwell in Q4, as it's still planning high-volume production of chips using the new platform this quarter. Morgan Stanley predicts more than $10 billion in Q4 revenue from Blackwell.

With the company's Q3 earnings report due out in November, investors should be mindful of the Osborne effect -- the tendency of customers who know that better new tech is just around the corner to cancel their planned purchases of the soon-to-be prior-generation option. In short, it's possible some buyers may be delaying some AI chip purchases until the Blackwell lineup arrives.

However, the new platform has the power to sustain Nvidia's soaring growth rate and advance generative AI applications, which would help assuage concerns about an AI bubble as companies are spending on AI infrastructure. However, there has yet to be a transformative and profitable use case for generative AI.

Right now, one thing is clear with Blackwell, however. There's no shortage of demand. As Huang told CNBC earlier, "Blackwell is as planned. Everybody wants to have the most and everybody wants to be first."

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Jeremy Bowman has positions in Meta Platforms. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Motley Fool contributor Jeremy Bowman has positions in Meta Platforms. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended JPMorgan Chase, Meta Platforms, Nvidia, and Tesla. The Motley Fool Australia has recommended Meta Platforms and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on International Stock News

A boy in a green shirt holds up his hands in front of a screen full of question marks.
International Stock News

2 reasons to buy Nvidia shares before November 20 (and 1 reason to wait)

This top AI stock has soared nearly 200% this year!

Read more »

A group of friends push their van up the road on an Australian road.
International Stock News

Why Tesla stock just pulled back

Tesla finally hit a speed bump after a blistering post-election rally.

Read more »

Two happy excited friends in euphoria mood after winning in a bet with a smartphone in hand.
International Stock News

Why Tesla stock keeps going up

Tesla stock costs more than $1 trillion now. Is that too expensive?

Read more »

A businessman in soft-focus holds two fingers in the air in the foreground of the shot as he stands smiling in the background against a clear sky.
International Stock News

2 Numbers I'll be looking for on November 20 when Nvidia reports earnings

While many analysts and investors will be looking at revenue and profit growth, two other figures are more important to…

Read more »

A man wearing a blue jumper and a hat looks at his laptop with a distressed and fearful look on his face.
International Stock News

Magnificent Seven: Unstoppable tech stock giants or risky buys?

Did you know the "Magnificent Seven" moniker was meant as a warning, not an endorsement? Check out the risks and…

Read more »

A fortune teller looks into a crystal ball in an office surrounded by business people.
International Stock News

Billionaire Warren Buffett sends an ominous sign to investors. Here's the silver lining

Buffett's actions don't bode well for the market, but a falling market has benefits for investors.

Read more »

A young girl looks up and balances a pencil on her nose, while thinking about a decision she has to make.
International Stock News

Should you buy Nvidia stock right now?

Nvidia stock has been the poster child for artificial intelligence and continues to defy the odds. But is the stock…

Read more »

A male investor sits at his desk looking at his laptop screen holding his hand to his chin pondering whether to buy Macquarie shares
International Stock News

The US election is done and dusted. Is now the time to buy the ASX NDQ ETF?

US stocks continue to march higher this week.

Read more »