Nvidia Stock: 3 Reasons AI Superstar May Move Higher in Q4

In case you forgot it still belonged to the stock market Nvidia (NVDA 2.81%)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 the opportunity to triple, really drive the innovation cycle so we can increase capabilities, increase throughput , to lower our costs, reduce our energy consumption.”

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

Huang’s latest comments contributed to a gain in Nvidia stock, but these three catalysts could fuel the stock further in the fourth quarter.

Image source: Nvidia.

1. Macroeconomic conditions appear stronger

Of late, Nvidia has been largely immune to the vicissitudes of the macro economy. The company has reported five consecutive quarters of triple-digit percentage revenue growth as it tries to meet seemingly insatiable demand for its AI components.

While either the Federal Reserve’s interest rate cut or September’s strong jobs report are unlikely to have a direct impact on Nvidia’s business, they should influence investors’ perception of the stock and its valuation patterns, as well as on the capital expenditure of its key customers.

In other words, lower interest rates should help loosen the strings for companies investing in AI, and increased confidence in the strength of the economy will also quell doubts about the AI ​​boom, as the two trends may 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 earnings

Excitement for generative AI and its potential applications continues to grow as the technology advances and companies implement new products such as Meta platforms‘ new generative AI photo editor. The latest funding round 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 rise.

Building on that momentum, there are a number of AI events slated for Q4 that could push Nvidia stock higher. For example, the AI ​​Summit that Nvidia is hosting from Monday to Wednesday this week will include presentations and live demonstrations on topics such as generative AI, remote sensing, robotics, industrial digitization and more. The company is not expected to launch new products at the conference, but favorable responses from industry insiders could push the stock higher, as could other surprise announcements.

The most anticipated AI-related event of the quarter is likely from Tesla robotaxi event, which is scheduled for Thursday. It’s unclear what Tesla will unveil, but CEO Elon Musk has talked for years about the idea that robotaxis will be transformative for his company, so expectations are high.

Importantly, Tesla’s self-driving systems are based on Nvidia’s AI hardware, and Musk has sung the company’s praises several times. Self-driving vehicles could be the next major frontier for Nvidia and AI, and Huang said in an interview in May that Tesla was “way ahead in terms of 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 weigh in on the company’s financial results. JPMorgan recently restated its expectations that Nvidia will generate several billion in sales from Blackwell in Q4, as it still plans to produce high-volume chips using the new platform this quarter. Morgan Stanley predicts over $10 billion in Q4 revenue from Blackwell.

With the release of the company’s Q3 earnings report in November, investors should be on the lookout for the Osborne effect — the tendency for customers who know a new, better technology is close to canceling their planned purchases of those who are about to. either soon. generate option. In short, some buyers may hold off on some AI chip purchases until the Blackwell lineup arrives.

However, the new platform has the power to support Nvidia’s growing growth rate and advance generative AI applications, which would help alleviate concerns about an AI bubble as companies spend on AI infrastructure. However, there is still no transformative and profitable use case for generative AI.

At this point, however, one thing is clear with Blackwell. There is no lack of demand. As Huang previously told CNBC, “Blackwell is as planned. Everyone wants to have the most and everyone wants to be first.”