Analysts are keeping an eye on Nvidia's Q3 results as AI demand drives growth

Nvidia Corp. (NVDA, Financial), a chipmaker and leading provider of computer processors and graphics, is scheduled to report its third-quarter results on November 20, marking one of the last big tech earnings reports of the year. The stock, which has risen more than 200% in the past year, remains a Wall Street favorite, largely due to its central role in addressing AI and data processing needs. Notably, highly respected industry analyst Toshiya Hari of Goldman Sachs remains bullish on Nvidia, with the stock currently trading at a P/E ratio below its historical average, positioning the company well to continue its outperformance.

Analyst Hari estimates that Nvidia's emerging business revenue will reach around $1 billion in the October quarter (fiscal fourth quarter), assuming supply remains stable and Blackwell GPUs are in full production this quarter. Demand for cloud services from customers such as Alphabet (GOOG, Financial), Microsoft (MSFT, Financial) and Amazon (AMZN, Financial) remains strong, although execution is constrained by supply constraints. For example, Microsoft expects Azure revenue to increase in the second half of fiscal 2025 following the COVID crisis as additional capacity becomes available.

Supported by a positive outlook for AI market growth, rival Advanced Micro Devices recently raised its forecast for the AI ​​accelerator market to $500 billion by 2028. While Hari acknowledges the potential risks of a slower AI adoption rate that could impact infrastructure spending, he believes any short-term economic correction will be minimal. Nvidia is expected to continue its expansion into various AI use cases in the coming quarters.

This article first appeared on GuruFocus.