Nvidia (NVDA 0.04%) has been a stock market star over the past few years, soaring alongside demand for its artificial intelligence (AI) chips. The company dominates the AI chip market, with its graphics processing units (GPUs) holding an 80% share. And this has helped revenue climb in the triple digits quarter after quarter. As a result, Nvidia stock has advanced more than 2,700% over the past five years.
And Nvidia has a potentially big development just ahead. The technology giant is set to launch its new Blackwell architecture and chip later this year. The company expects to ramp up production in the fourth quarter and even generate major revenue from the platform. Should you buy Nvidia stock before this big launch? Let's take a look at what history says.
Image source: Getty Images.
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 just 4% of the energy than Nvidia's earlier platform, Hopper. The total cost of ownership should follow suit with a drop in the same range. And Hopper will include six game-changing technologies, including the world's most powerful AI chip and high-performance networking, security, and reliability features.
For example, Blackwell's fifth-generation NVLink offers high-speed communication among as many as 576 GPUs. And the new Blackwell GPU holds 208 billion transistors -- there are 80 billion in Nvidia's current top chip, the H100. More transistors equals greater processing power, a major plus for customers launching generative AI projects.
Nvidia says demand for Blackwell has surpassed supply and predicts this will continue into the next fiscal year. And investors won't have to wait long to see revenue emerging from this new platform. The chip designer expects "several billion dollars" of Blackwell revenue in the fourth quarter.
Will Nvidia's shares take off following the Blackwell launch? The stock dipped recently, falling nearly 20% from the start of July through the early days of August. Still, it rebounded from that decline and is now heading for a 140% increase since the start of the year.
NASDAQ: NVDA
Key Data Points
Will Nvidia's momentum continue?
Could the Blackwell launch keep the momentum going? Let's look at how Nvidia stock performed following the launches of its two previous architectures, Hopper and Ampere. Nvidia released Hopper in the fall of 2022 and Ampere in the spring of 2020. In both cases, the stock rose by double digits in the three months following the launch -- 22% following the release of Hopper and 44% following the release of Ampere.
But there's no guarantee that history will repeat itself. And this brings me to the importance of long-term investing.
No matter what Nvidia stock does in the three months following the Blackwell launch, there are plenty of reasons to be positive about the shares over the long term. The company, which has promised annual updates to its chips, is likely to maintain its AI chip leadership. This should make it very difficult for rivals to unseat Nvidia.
Nvidia's big customers
The chip designer has also expanded well beyond the GPU, offering entire platforms for AI and selling its products through major cloud service providers. Many of the world's biggest technology companies, like Microsoft and Meta Platforms, rely on Nvidia's GPUs to power their 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 shares are trading for about 42 times forward earnings estimates. While this isn't dirt cheap, it's a very reasonable price for a company that's delivered so much growth in recent years and is likely to keep that momentum going thanks to its focus on innovation.
So even if Nvidia doesn't surge after the launch of Blackwell, the long-term picture remains bright -- and that makes it a fantastic stock to snap up today and hang on to for the long haul.
