Should You Buy Nvidia Before Blackwell Releases? Here’s what history says

Nvidia (NVDA 1.51%) has been a stock market star in recent years, growing alongside demand for its artificial intelligence (AI) chips. The company dominates the AI ​​chip market, with its graphics processing units (GPUs) holding an 80 percent share. And this has helped revenue grow in triple digits quarter after quarter. As a result, Nvidia stock is up more than 2,700% over the past five years.

And Nvidia has a potentially big development just ahead. The tech giant is slated to release its new Blackwell architecture and chip later this year. The company expects to increase production in the fourth quarter and even generate major revenue from the platform. Should You Buy Nvidia Stock Before This Big Release? Let’s take a look at what history says.

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Blackwell’s game-changing technologies

First, let’s consider why Blackwell itself is such an important development for Nvidia. This architecture is designed to run generative AI applications while consuming only 4% of the power than Nvidia’s previous platform, Hopper. Total cost of ownership should follow suit with a drop in the same range. And Hopper will feature six game-changing technologies, including the world’s most powerful AI chip and high-performance networking features, security and reliability.

For example, Blackwell’s fifth-generation NVLink provides high-speed communications between up to 576 GPUs. And the new Blackwell GPU has 208 billion transistors — there are 80 billion in Nvidia’s current flagship chip, the H100. More transistors means more processing power, a major plus for customers launching generative AI projects.

Nvidia says demand for Blackwell has outstripped supply and predicts that will continue into the next fiscal year. And investors won’t have to wait long to see the revenue coming out of this new platform. The chip designer expects “several billion dollars” in Blackwell revenue in the fourth quarter.

Will Nvidia Stock Take Off After Blackwell Launch? The stock has been on a downward spiral recently, falling nearly 20% from early July to early August. However, it has bounced back from that decline and is now heading for a 140% YTD gain.

Will Nvidia’s momentum continue?

Could Blackwell’s release keep the momentum going? Let’s look at how Nvidia stock performed after the release of the two previous architectures, Hopper and Ampere. Nvidia launched Hopper in fall 2022 and Ampere in spring 2020. In both cases, the stock rose by double digits in the three months after launch — 22% after Hopper’s launch and 44% after Ampere’s launch. .

But there is no guarantee that history will repeat itself. And that brings me to the importance of long-term investing.

Regardless of what Nvidia stock does in the three months since Blackwell’s launch, there’s plenty of reason to be positive about the stock over the long term. The company, which has promised annual updates to its chips, is likely to maintain its lead in AI chips. This should make it very difficult for rivals to unseat Nvidia.

Nvidia’s big customers

The chip designer has also expanded well beyond GPUs, offering entire platforms for AI and selling its products through major cloud service providers. Many of the world’s largest technology companies such as Microsoft and Meta platformsrelies on Nvidia GPUs to power its AI projects. And all of this is happening in a high-growth environment. Market research firm MarketsandMarkets expects the AI ​​market to expand from about $200 billion right now to more than $1 trillion by the end of the decade.

Meanwhile, Nvidia stock is trading for about 42 times forward earnings estimates. While that’s not exactly cheap, it’s a very reasonable price for a company that’s seen so much growth in recent years and is likely to maintain that momentum thanks to its focus on innovation.

So even if Nvidia doesn’t grow after the Blackwell release, the long-term picture remains bright — and that makes it a fantastic stock to buy today and hold for the long term.