Semiconductor company Nvidia (NVDA -3.26%) has become the go-to artificial intelligence (AI) stock for many investors. Since ChatGPT launched in late 2022, Nvidia shares have surged about 950%, making it the best-performing stock on the market. S&P500 (^GSPC -1.32%).

On Wednesday, November 20, Nvidia will announce its results for the third quarter of fiscal 2025, which ended October 2024. I expect the stock to soar in the days and weeks following the release of the report for three simple reasons. Read on to find out more.

1. Nvidia will likely provide an encouraging update regarding its Blackwell GPUs

Nvidia builds the most coveted graphics processing units (GPU) in the computer industry, as they have become the benchmark for acceleration artificial intelligence (AI) workloads. Indeed, Nvidia holds more than 80% market share in AI accelerators, and Forrester Search recently wrote: “Without Nvidia GPUs, modern AI would not be possible.”

Nvidia told investors last quarter that ramping up production of its Next-generation Blackwell GPU would start on the fourth fiscal quarter (i.e. current) of 2025, which ends in January 2025. Management will likely provide an update during the third-quarter earnings call, and shareholders have reason to anticipate good news. Earlier this year, CEO Jensen Huang said Blackwell would be the most successful product launch in the company’s history.

Additionally, Nvidia executives recently told analysts that Blackwell GPUs were already “booked for 12 months.” This means that demand for the new processors is so strong that it will take the company an entire year to fill its existing order book. Therefore, Nvidia would like to give encouraging guidance on November 20, which should push the stock higher.

2. Wall Street analysts have revised their profit estimates upwards

Nvidia provided encouraging guidance for the third quarter. Management said revenue would increase 80% to $32.5 billion (give or take 2%) due to continued demand for the current generation of GPUs, called Hopper. Management also stated non-GAAP earnings would increase by 80% to $0.72 per diluted share (plus or minus 2%).

However, Wall Street analysts have been steadily raising their third-quarter earnings estimates since Nvidia first gave its guidance. The consensus now calls for earnings to rise 85% to $0.74 per diluted share, according to LSEG. The analysts also raised their price targets, such that the consensus of $156 per share implies a 10% upside from the current stock price of $142.

Wall Street analysts are not omniscient, but their knowledge is valuable because they have more resources than retail investors. The fact that analysts have become more optimistic ahead of Nvidia’s third quarter report is a good sign. This suggests that very thorough research has revealed signs of strong demand. This could send the stock higher after November 20.

Image source: Getty Images.

3. Nvidia Customers Expect Increased Capex Spending in Coming Quarters

Nvidia counts all the largest hyperscale cloud computing companies among its customers. This includes Alphabet, Amazon, MetaplatformsAnd Microsoft. These companies have not only invested aggressively in AI infrastructure throughout 2024, but also expect capital expenditure increase next year.

• Alphabet’s capital spending totaled $13 billion in the third quarter, most of which was spent on infrastructure, and management expects a similar level of spending in the fourth quarter. But Chief Financial Officer Anat Ashkenazi told analysts: “We expect an increase in 2025.”
• Amazon expects its capital spending to total about $75 billion in 2024. But CEO Andy Jassy recently told analysts, “I think we’ll spend more in this area in 2025.” He said most of that capital was earmarked for its cloud computing business, and he specifically mentioned generative AI as a boost.
• Meta-platform capital expenditures will amount to approximately $40 billion in 2024, most of which has been allocated to AI servers. However, CFO Susan Li recently told analysts: “We expect infrastructure spending growth to accelerate significantly next year.”
• Microsoft’s capital spending totaled $20 billion in the first quarter of fiscal 2025, which ended in October 2024. Chief Financial Officer Amy Hood told analysts: “We expect capital spending increases sequentially given our cloud and AI demand signals.

Some of the expenses discussed above reflect strong demand for Blackwell. However, Nvidia is also building central processing units (CPU) and network equipment. In fact, the company has gained a leading position in the field of AI network equipment, according to Bloomberg. Thus, the increase in capital expenditures further supports the idea that Nvidia will give encouraging guidance when it announces third quarter results. This could send the stock higher after November 20.

However, the most important point to remember is that Nvidia has a key competitive advantage In vertical integration. Because the company designs entire data centers efficiently, Nvidia can build systems with a higher total cost of ownership, according to Jensen Huang. This should allow the company to stay ahead of its competitors in the coming quarters and years. Indeed, Morgan Stanley Analyst Joseph Moore recently wrote: “The market tends to underestimate the difficulty of competing with Nvidia.”