Prediction: Nvidia stock will rise in Q4

It has Nvidia (NVDA 1.53%) has it finally run out of winning surprises?

The high-flying AI chip superstar appeared to run out of gas in its fiscal 2025 second quarter earnings report it released on August 28. While the company beat estimates on the top and bottom lines, the differences were narrower than investors were used to. , and the guidance was also less impressive than some had hoped.

In addition, the company reported its first sequential decline in gross margin since demand for its graphics processing units (GPUs) surged following the launch of OpenAI’s ChatGPT, a sign that the chipmaker’s profitability has peaked.

Since then, Nvidia has continued to backtrack, falling on a report on Tuesday that was subpoenaed by the Justice Department as part of an antitrust investigation. The company later said it had not received a subpoena.

However, since its close on September 6, the stock has fallen 18% from where it was trading before the earnings report.

This creates a potential buying opportunity for investors, as the stock is now as cheap as it has been (on a valuation basis) since the AI ​​boom began, trading at a price-to-earnings ratio of 49.

For investors considering buying the dip in Nvidia, AI stock is well-positioned to recoup its recent fourth-quarter losses and move higher. Let’s take a look at some reasons.

Image source: Nvidia.

1. The Blackwell release could be huge

The release of Nvidia’s new Blackwell platform has been eagerly awaited since the company announced it in March at the GTC conference.

The new GPU ecosystem was delayed by about three months due to a design flaw, but is expected to be ready to go in the fourth quarter. According to Nvidia, Blackwell is capable of running generative AI programs and massive large language models at up to 25 times lower cost and power requirements than the previous Hopper model. This could be a game-changer for the AI ​​industry across the wide range of companies that depend on Nvidia GPUs.

CFO Colette Kress told investors on the recent earnings call, “Demand for Blackwell platforms is far outstripping supply, and we expect that to continue next year.”

The launch of the platform should support the company’s growth and margins, and a successful launch is likely to boost the stock as well.

Investors will be watching management’s guidance closely when the company reports its fiscal third-quarter earnings in November for signs of Blackwell’s impact.

2. Falling interest rates should be a tailwind

The Fed is expected to cut interest rates at its meeting later this month, and rate cuts could fuel gains for Nvidia and much of the stock market. Lower interest rates will encourage more consumer spending and business investment, and tend to favor growth stocks like Nvidia as well.

There was already evidence of that, as Nvidia shares rose 4.5% on August 23 after Fed Chairman Jerome Powell signaled that the time had come for the central bank to start cutting rates.

Assuming rates drop as fast or even faster than expected, Nvidia is likely to benefit.

3. Infrastructure spending will continue to rise

Much of Nvidia’s demand comes from cloud infrastructure giants such as Microsoft, Alphabet, Meta platformsand Amazonand those companies appear to continue to ramp up purchases of Nvidia components as they develop their AI capability.

Top tech CEOs like Meta’s Mark Zuckerberg and adzeElon Musk emphasized the importance of staying ahead of the AI ​​race, as the consequences of falling behind could be far greater than overspending on AI hardware.

Additionally, Q4 tends to be a strong quarter in the technology industry, particularly in software and cloud infrastructure, and solid demand there should support additional spending on Nvidia products.

After retreating following its fiscal second-quarter report, Nvidia is benefiting from lower expectations and a more attractive stock price. If the company does well on the Blackwell launch, not to mention some impetus from the macroeconomic environment, it could return to previous highs in the fourth quarter and beyond.