Deepwater Asset Management’s Gene Munster shared his views about NVIDIA (NVDA)’s earnings call yesterday. Here is a summary of his thoughts:
NVIDIA Corporation (NASDAQ:NVDA)’s earnings report provides insight into the company’s growth trajectory, highlighting the aspects that matter and those that don’t. The company delivered $35 billion in revenue for the October quarter, meeting whisper numbers, and issued a January guidance of $37.5 billion, slightly below the whisper number of $38 billion. Gross margins dipped a bit too, but ultimately these numbers don’t matter as much.
The AI star lies in a boom or bust industry. Before the generative AI excitement, the company’s business declined 21% year-over-year. However, Nvidia’s market cap has skyrocketed since, driven by the extraordinary demand for its Blackwell GPUs.
The true pressure point for Nvidia lies in the commentary about Blackwell, Nvidia’s generative AI architecture. Looking at the key commentary from Nvidia’s CFO, we find that demand for Blackwell will continue to exceed supply for several quarters. There have also been some supply difficulties, albeit quite small. This narrative has evolved positively compared to the October earnings call, with supply constraints expected to ease slightly earlier—from “into 2025” to “mid-2025.”
Additionally, the earnings call mentions twice that the demand for Blackwell has grown even stronger over the past three months, setting up 2025 as a robust year. While this doesn’t provide complete visibility into 2026, it does base a strong foundation for continued momentum.
Driving Nvidia’s growth is the principle of scaling laws. Scaling is what’s effectively needed to make AI models smarter. Jensen Huang, Nvidia’s CEO, likened this to Moore’s Law, where CPU speeds doubled every few years even though it was expected otherwise. The industry’s continuous innovation and adherence to scaling principles are bound to propel Nvidia’s AI computing demand, reinforcing the long-term outlook.
Wall Street projects 20% year-over-year growth for calendar year 2026. Based on Nvidia’s trajectory, Deepwater anticipates this could accelerate to over 30% growth, stating that there is plenty of time for the business to appreciate.
Our research director shared his views on NVDA’s earnings results here. He thinks NVDA stock can reach $170 within 3 months. While we acknowledge the potential of NVDA as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
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