Nvidia(NASDAQ: NVDA) has wowed investors over the past few years with its mind-boggling pace of innovation, launching new architectures and graphics processing units (GPUs) to stay on top in the high-growth area of artificial intelligence (AI). The Ampere architecture arrived in 2020, and Hopper followed in 2022. This has helped the tech giant generate triple-digit data center revenue growth quarter after quarter.
In between the architecture launches, Nvidia released new GPUs, improving upon the H100 with the new H200, for example. Chief Executive Officer Jensen Huang pledges to update chips on an annual basis, and this rhythm should keep the tech giant ahead.
Are You Missing The Morning Scoop? Wake up with Breakfast news in your inbox every market day. Sign Up For Free »
However, the one launch everyone has been waiting for and talking about is the Blackwell architecture, and today, that launch is on the way. The company expects to ramp-up production in this current quarter.
Everyone's excited about Blackwell because of its game-changing features -- six transformative technologies, including the most powerful GPU yet and high-speed networking and preventative maintenance capabilities. Below are three things you need to know about this exciting new revenue driver for Nvidia.
Image source: Getty Images.
The supply chain is vast
With such a major launch ahead, some investors may worry about risks to the supply chain. Nvidia doesn't create all of its products in-house and relies on suppliers for certain materials or services -- for instance, Micron Technology and SK Hynix for memory components.
It also relies on partners to incorporate its GPUs into their products, like servers, and sell these to customers. This is where companies like equipment makers Super Micro Computer and Dell fit in.
"Almost every company in the world seems to be involved in our supply chain," Huang said during this week's third-quarter earnings call. Though this requires a lot of organization from Nvidia, it's very positive because it allows the company to ramp-up production to a high level. Nvidia is going from zero Blackwell shipments last quarter to billions this current quarter -- and that couldn't be done with only a limited number of players.
A solid supply chain also ensures that if one supplier encounters a problem, Nvidia could turn to another to pick up the slack. This reduces the risk of delayed deliveries, something Nvidia surely aims to avoid, considering the high level of demand for the new Blackwell platform.
Big customers are creating massive levels of demand
Nvidia doesn't disclose exactly how much of its revenue each customer represents. But through comments from Huang and these customers, we know that the biggest tech players today are driving demand for Blackwell. Microsoft, Oracle, and OpenAI all have received Blackwell systems, according to their social media posts.
In recent earnings reports, customer Meta Platforms spoke of increasing its investment in AI infrastructure spending, a move that suggests more spending on Nvidia's products, and Alphabet said it would be one of the first to provide Blackwell GPUs at scale. We also can add to this a recent comment by Oracle co-founder Larry Ellison, who said he and Tesla chief Elon Musk "begged" Nvidia's Huang for more GPUs.
These tech giants have the financial resources to continue heavily investing in AI. Their strong desire to win in this AI revolution means they're likely to keep returning to the company providing the top-performing products and services. And that's Nvidia.
This should offer investors confidence about Blackwell's ability to become Nvidia's next major growth driver.
Gross margin will dip before moving higher
In the third quarter, Nvidia reported gross margin of more than 74%, a figure showing a jaw-dropping level of profitability on sales. The tech giant has maintained levels wider than 70% quarter after quarter.
However, Nvidia now forecasts a slight dip in gross margin to the low 70% level as the Blackwell launch unfolds. This isn't alarming -- and actually is completely normal -- considering the job Nvidia has right now and just ahead.
The company is working with many moving parts, including various Blackwell configurations, seven different chips, many networking possibilities, and a variety of customers from cloud providers to equipment makers. Managing all of this in the early days of the launch will be costly for Nvidia, but this is a temporary problem.
When Blackwell has reached full production, Nvidia predicts gross margin will settle around the mid-70% level, possibly in the second half of next year. That level of profit on sales, along with solid revenue growth quarter after quarter, could make Nvidia -- and its investors -- major winners in this AI revolution.
Should you invest $1,000 in Nvidia right now?
Before you buy stock in Nvidia, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nvidia wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $898,809!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. TheStock Advisorservice has more than quadrupled the return of S&P 500 since 2002*.
Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Adria Cimino has positions in Oracle and Tesla. The Motley Fool has positions in and recommends Alphabet, Meta Platforms, Microsoft, Nvidia, Oracle, and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
