This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Shares of Nvidia (NASDAQ: NVDA) are up 4.5% in Wednesday's after-hours trading as of 5:57 p.m. ET, following the artificial intelligence (AI) tech leader's release of its report for its third quarter of fiscal 2026 (ended Oct. 26, 2025).

Investors' positive reaction is attributable to Q3 revenue and adjusted earnings per share both beating Wall Street's estimates, and Q4 guidance for both the top and bottom lines also coming in higher than analysts had expected.

The strong guidance was probably the most significant catalyst for Nvidia stock's upward move. It's an indication that the outlook for the AI market in general remains robust.

In recent weeks, Nvidia and other AI stocks have been struggling. Investors have become increasingly concerned about AI stock valuations, fearing that an AI stock bubble may be forming. These struggles were in part caused by the Nov. 4 revelation that Michael Burry, now a former hedge fund manager, took bearish positions (by buying put options) on Nvidia and Palantir stocks in the third quarter. 

Nvidia's key numbers

Generally accepted accounting principles (GAAP) numbers include one-time items. Investors should focus on the adjusted numbers, which exclude one-time items.

Wall Street was looking for adjusted EPS of $1.26 on revenue of $55.09 billion, so Nvidia exceeded both expectations. It also beat its own guidance, which was for adjusted EPS of $1.22 on revenue of $54 billion.

For the quarter, GAAP and adjusted gross margins were 73.4% and 73.6%, respectively.

Platform performance

The data center platform's performance was driven by "three platform shifts -- accelerated computing, powerful AI models, and agentic applications," Colette Kress said in her CFO commentary. She added that "Blackwell Ultra is now our leading architecture across all customer categories while our prior Blackwell architecture saw continued strong demand."

The 1% sequential slip in gaming revenue is no cause for concern. Kress said that distribution channels have reached "more normalized levels heading into the holiday season."

Professional visualization had a strong quarter, driven by the launch of the company's new DGX Spark (a compact AI supercomputer) and the growth of Blackwell sales.

Auto revenue growth was driven by the continued adoption of Nvidia's self-driving platforms, which are widely adopted by car companies and others developing driverless technology and driverless vehicles.

What the CEO had to say

CEO Jensen Huang stated in the earnings release:

Blackwell sales are off the charts, and cloud [computing] GPUs [graphics processing units] are sold out. Compute demand keeps accelerating and compounding across training and inference -- each growing exponentially. We've entered the virtuous cycle of AI. The AI ecosystem is scaling fast -- with more new foundation model makers, more AI start-ups, across more industries, and in more countries. AI is going everywhere, doing everything, all at once.

Guidance for the fourth quarter

For Q4 of fiscal 2026, which ends in late January, management expects revenue of $65 billion, representing a year-over-year growth rate of 65%.

Management also guided (albeit indirectly, by providing several inputs) for adjusted EPS of $1.50, representing 69% growth.

Going into the report, Wall Street had been modeling for Q4 adjusted EPS of $1.43 on revenue of $61.84 billion, so the company's outlook sprinted by both expectations.

Nvidia stock is not in a bubble

In short, Nvidia delivered yet another report with fantastic quarterly results and strong guidance.

Nvidia stock is not in a bubble. Shares were priced at 52 times trailing one-year earnings and 27 times forward one-year earnings at the close of Wednesday's regular trading session. These are reasonable valuations for a company that has just grown its quarterly adjusted EPS by 60% and guided for adjusted EPS growth of 69% next quarter.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Nvidia stock in an AI bubble? The AI giant's fantastic Q3 results and guidance should put that concern to rest appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• The growing case for this semiconductor ASX ETF
• ASX investors: Are you overinvested in the Magnificent 7 without knowing it?
• If I could buy only one ASX ETF for the next 10 years, this could be it
• Could this ASX ETF be the easiest way to invest in AI?
• 5 things to watch on the ASX 200 on Thursday

Beth McKenna has positions in Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Nvidia. The Motley Fool Australia has recommended Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Last week, the tech-heavy Nasdaq Composite index dropped 3%, which was its worst week since April. The other major indexes were also down.

This sell-off, which hit tech stocks the hardest, was sparked on Tuesday by the revelation that well-known billionaire Michael Burry's Scion Asset Management hedge fund made big bearish bets on artificial intelligence (AI) stock darlings Nvidia (NASDAQ: NVDA) and Palantir Technologies (NASDAQ: PLTR) in the third quarter.

Shares of Nvidia and Palantir declined 7.1% and 11.2%, respectively, last week. Nvidia is the leader in AI chips and related tech and is largely responsible for enabling the AI revolution. Palantir operates an AI-powered data analysis platform.

Burry's bets against Nvidia and Palantir were disclosed in a Securities and Exchange Commission (SEC) Form 13F filing. These forms show a fund's holdings and are required to be filed within 45 days after the end of every quarter. 

Who is Michael Burry?

Burry's name recognition stems in part from his being the subject of the 2015 film The Big Short, based on a book of the same name.

He predicted the subprime mortgage crisis, which led to the popping of the real estate bubble. And this event contributed to the 2008 financial crisis and the Great Recession. Burry and his investors made huge bucks from his short bets, which is an oversimplification of what he did, but suffices here. (Short-sellers are betting that a particular stock or other financial instrument or the entire market will decline.)

The "Big Short" deserves "big kudos" for his prediction. That said, it doesn't seem to me that the skillset that would allow a person to analyze the subprime real estate market is the same skillset needed to predict what investors in the stock of Nvidia, which -- very relevantly -- is growing revenue and earnings like gangbusters, will do.

Burry's bearish bet on Nvidia stock

Burry bought 1 million Nvidia put options with the underlying stock valued at $186.6 million at the end of the third quarter. Options (calls and puts) are commonly sold in contract sizes of 100 shares of the underlying stock, so Burry purchased 10,000 Nvidia put contracts.

We don't know exactly when he bought these options, only that they were purchased between July 1 and Sept. 30. We also don't know other details, such as their costs, strike price, or expiration dates.

The BIG $500-billion-dollar reason the Big Short's bearish bet on Nvidia stock is poised to lose

There are several reasons that I believe Burry's bearish bet on Nvidia stock will turn out to be a losing bet. But I'll keep things simple and just focus on what I consider to be the biggest reason. I'll let Nvidia CEO Jensen Huang "speak," and then I'll expound and add context:

We have visibility into a half a trillion dollars of cumulative Blackwell and early ramps of Rubin through 2026. ... So, next 5 quarters, there is a half a trillion dollars [of demand].

This quote comes from Huang's keynote address on Oct. 28 to kick off the company's first GTC (GPU Technology Conference) in Washington, D.C., during the last week of October. (GPU stands for graphics processing units, which are Nvidia's core semiconductors, or chips.)

Before we move further, notice the date of Huang's remark. It was about one month after the end of the third quarter, which means that Burry was not privy to it (or the other great news shared at GTC D.C.) when he made his bearish bet on Nvidia stock. (That is, unless Huang shared it before, which I don't think is the case.)

In Huang's statement, Blackwell refers to the architecture of Nvidia's AI-enabling data center GPUs that are in the early stages of shipping, and Rubin refers to the company's next-generation GPUs, expected to begin shipping in roughly a year.

So, Huang has "visibility" into $500 billion of demand for its key data center technology over about five quarters. This demand is humongous! Let me put it in context.

In its fiscal second quarter (ended in late July), Nvidia's data center platform's revenue was $41.1 billion, which was 88% of its total revenue.

If we assume Nvidia is able to fulfil the demand for $500 billion in five quarters, that equates to an average of $100 billion per quarter. That's 2.4 times the data center revenue in the most recently reported quarter.

Even if we assume that Nvidia can't fulfill that entire $500 billion demand by the end of 2026, its data center sales are still poised to explode, as you can see by these numbers.

What if that $500 billion demand doesn't materialize?

It's highly unlikely that companies that have orders or other buy commitments or buy plans for Nvidia data center GPUs and related tech will back out of them. Doing so would mean they'd likely go to the back of the (usually long) line, so to speak, if they wanted to buy them in the future.

I have no doubt that the leaders of the big tech companies -- which are the major buyers of Nvidia's data center chips and other tech -- and many other companies realize they cannot risk falling behind their competitors in AI capabilities. If they do so, they might never catch up, and their businesses will likely suffer.

What if there's an economic downturn? This is a good news-bad news answer. I think the big tech companies that are the main buyers of Nvidia's data center GPUs will lay off more employees rather than cut their spending on AI in the event of an economic downturn. If they do cut their spending on AI, it won't be by much.

In short (pardon the pun), betting against the stock of a company like Nvidia, which has powerful financial performance and demand dynamics and a reasonable valuation, is very risky. Michael Burry's bearish bet is more likely to be a loser than a winner, in my view.

As to Nvidia stock's valuation, as of Friday's market close, its forward price-to-earnings (P/E) ratio is 29.9, which is very reasonable for a company that Wall Street expects to grow earnings per share (EPS) at an average annual rate of 40% over the next five years. Moreover, Nvidia nearly always beats the analyst consensus earnings estimate, which means its forward P/E (which is based on Wall Street's projected EPS over the next year) is likely to turn out to be overstated. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Prediction: The $500 billion reason Nvidia stock will show bearish billionaire Michael Burry who is boss appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• The growing case for this semiconductor ASX ETF
• ASX investors: Are you overinvested in the Magnificent 7 without knowing it?
• If I could buy only one ASX ETF for the next 10 years, this could be it
• Could this ASX ETF be the easiest way to invest in AI?
• 5 things to watch on the ASX 200 on Thursday

Beth McKenna has positions in Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Nvidia and Palantir Technologies. The Motley Fool Australia has recommended Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Key Points

• The AI giant has exceeded the analyst consensus earnings estimate in 18 of the last 20 quarters, so the probability seems high it will do so again on Aug. 27.

• An "earnings beat" is no guarantee the stock price will rise, as history shows.

• Long-term investors should focus on Nvidia's quarterly earnings results and guidance. The stock price will take care of itself over the long term.

Nvidia (NASDAQ: NVDA) is slated to report its results for the second quarter of fiscal 2026 (ended July 27) on Wednesday, Aug. 27, after the market close.

As in recent quarters, the artificial intelligence (AI) technology giant's upcoming report is arguably the most anticipated of this quarterly earnings season. Nvidia is considered a bellwether, or indicator, for the AI space, and also to some degree for the entire market. This is because not only is the company the largest AI company by market cap, it's also the largest stock on the S&P 500 index.

Nvidia's Q2 results will not include any H20 chip sales to China, as the U.S. government's export controls on these made-for-China data center AI chips spanned the entire quarter.

Nvidia's Q2 guidance and Wall Street's estimates

Data sources: Nvidia and Yahoo! Finance. Fiscal Q2 2026 ended July 27, 2025. *Calculation by the author based on the metrics for which management provided guidance.

Nvidia's strong earnings beat track record

Nvidia has a great track record of exceeding Wall Street's consensus earnings estimates, so the chances seem high that it will do so on Aug. 27.

Following is data for the past 20 quarters, or five years. I also broke out the results of the last four quarters to show the earnings beats have been a little smaller recently.

Data source: Nvidia. Calculations by author. *Earnings in the form of adjusted earnings per share (EPS). **Rounded to nearest whole number.

Nvidia's post-earnings-release stock price movements

Long-term investors should focus on Nvidia's report -- its results, guidance, and management commentary on the earnings call -- and not be overly concerned with the stock price movement after the release.

Nvidia's stock price will continue to rise over the long term as long as the company continues to perform well. Short-term movements in the stock can occur for many reasons unrelated to Nvidia's underlying business performance, including recessions, trade policy and tariffs, geopolitical tensions, and other macroeconomic events.

That said, here's how Nvidia stock performed the day after the last nine earnings releases.

Data sources: Nvidia's earnings reports, Yahoo! Finance, and YCharts. *Rounded to nearest whole number.

I chose nine quarters for a reason: These are the quarters the company has reported since generative AI burst onto the scene in late 2022, when OpenAI released its ChatGPT chatbot. This new technology lit a fire under the demand for Nvidia's AI-enabling data center products, which had already been selling well.

Why Nvidia stock doesn't always rise after an earnings beat

Nvidia's beating Wall Street's earnings estimate is no guarantee that its stock will rise, as the chart above shows. There are several reasons for this, including that guidance (relative to Wall Street's expectations) can affect the stock price as much as, if not more than, the current quarter's results, and overall market dynamics can influence the stock's movement.

Wall Street's expectation for fiscal Q3 guidance

As to guidance, Wall Street is currently modeling for third-quarter revenue of $52.5 billion, or 50% year-over-year growth, and adjusted EPS of $1.19, or 47% year-over-year growth.

Guidance should be particularly interesting as it should include H20 sales, as Nvidia was given the green light by the government to resume sales of these chips. Earlier this month, the U.S. Commerce Department reportedly began issuing export licenses for Nvidia's H20 chip. In exchange for the licenses, Nvidia must pay 15% of H20 revenue to the government. (Chipmaker Advanced Micro Devices, or AMD, struck a similar deal with the government.)

That said, it's possible that expected H20 sales included in Q3 guidance won't be as strong as in the past or that investors are expecting. On Friday, The Information reported that "Nvidia has told some of its component suppliers to suspend production work related to the H20." This move is reportedly due to the Chinese government's recent directive to the nation's companies to not buy the chip because of security concerns.

Prediction: An earnings beat and a stock movement dependent upon the H20 chip news

Given Nvidia's track record, I'm predicting it will beat Wall Street's earnings estimate.

That said, I think the stock's movement will largely depend on H20 news and related Q3 guidance. If the news reported on Friday about the company halting production of the H20 is accurate and if we learn from management that no progress has been made in getting China to discontinue its directive, then Nvidia stock could decline -- or, at best, be little changed. Good news on this front, however, would likely see the stock gaining.

Regardless of what happens, one quarter is just one quarter. Keep the big picture in mind: Nvidia stock is a multiyear winner, in my view, because the company's AI infrastructure technology is largely enabling the global AI revolution.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Nvidia's earnings on Aug. 27: What history tells us about Nvidia stock's post-earnings-release moves appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• The growing case for this semiconductor ASX ETF
• ASX investors: Are you overinvested in the Magnificent 7 without knowing it?
• If I could buy only one ASX ETF for the next 10 years, this could be it
• Could this ASX ETF be the easiest way to invest in AI?
• 5 things to watch on the ASX 200 on Thursday

Beth McKenna has positions in Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Advanced Micro Devices and Nvidia. The Motley Fool Australia has recommended Advanced Micro Devices and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

On Monday night, Nvidia (NASDAQ: NVDA) announced that it will resume sales of its H20 artificial intelligence (AI) chip to China, which it had halted in April because of new U.S. government export controls, citing national security concerns. Nvidia's announcement came via an email just after 9:30 p.m. ET to investors who subscribe to the company's news and other releases with a link to a blog post.

This is great news for investors and should help propel Nvidia stock higher.

Nvidia given OK by U.S. government to resume sales of the H20

Nvidia's email announcement credited CEO Jensen Huang for the H20 news, stating that he "has been promoting AI this month in Washington, DC, and China -- emphasizing the benefits that AI will bring to business and society worldwide."

But here's the core message for investors contained in Nvidia's email announcement: "NVIDIA is filing applications to sell the NVIDIA H20 GPU [graphics processing unit] again. The U.S. government has assured NVIDIA that licenses will be granted, and NVIDIA hopes to start deliveries soon."

Note the word "soon" -- Nvidia hopes to start deliveries "soon." Nvidia's fiscal second quarter ends in late July. So it seems likely that this H20 news will start making a major impact in the fiscal third quarter. More on potential financial implications follows.

U.S. chip export controls to China expanded to include the H20 in April

As I wrote at the time: "Nvidia stock fell 6.9% on Wednesday [April 16], following the tech giant's Tuesday night disclosure via a filing with the U.S. Securities and Exchange Commission (SEC) that it plans to take charges of up to $5.5 billion on its fiscal first-quarter results. The charges stem from the U.S. government enacting restrictions on the export of its H20 chip to China and select other countries."

As it ended up, Nvidia took charges (for H20 products in inventory and purchase commitments) of less than the maximum that it had originally estimated. In late May, when it reported its fiscal first-quarter results, the total H20-associated charges were $4.5 billion. Yes, that's still huge.

Potential implications of resumed H20 sales on Nvidia's financial results and its stock

First, let's consider how the halt in H20 sales in mid-April affected Nvidia's results for its fiscal Q1 (ended on April 27). Its results were considerably hurt by this event.

In addition to taking the $4.5 billion in charges, the company was unable to ship $2.5 billion in H20 chips that it had already produced. In other words, it "lost" sales of $2.5 billion. However, it was able to book H20 sales of $4.6 billion in the quarter prior to the implementation of the new export controls.

Nvidia's Q1 total revenue was $44.1 billion. So, its $4.6 billion in H20 sales to China accounted for 10.4% of its total revenue. And had the company been able to ship the additional $2.5 billion in H20 chips, its H20 sales would have been $7.1 billion and 16.1% of its total revenue. This is a big chunk of total revenue and clearly shows the significance of the Chinese market.

The good news is that investors can probably expect Nvidia's quarterly H20 sales to resume in the general ballpark of where they left off, if not higher.

Monday night's news is fantastic for the stock. Nvidia has been firing on all cylinders, but investor concern over the company losing its Chinese market for its data center AI chips has likely kept the stock from rising as much as it otherwise would.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Nvidia's stock looks set to soar on resumption of H20 AI chip sales to China appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• The growing case for this semiconductor ASX ETF
• ASX investors: Are you overinvested in the Magnificent 7 without knowing it?
• If I could buy only one ASX ETF for the next 10 years, this could be it
• Could this ASX ETF be the easiest way to invest in AI?
• 5 things to watch on the ASX 200 on Thursday

Beth McKenna has a position at Nvidia. The Motley Fool Australia’s parent company, Motley Fool Holdings Inc., has positions in and has recommended Nvidia. The Motley Fool Australia has recommended Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Alphabet's (NASDAQ: GOOG)(NASDAQ: GOOGL) Waymo unit is widely considered the front-runner in the driverless vehicle space, while Tesla (NASDAQ: TSLA) generates the most publicity in this realm, with its CEO touting that it will be the first to "solve autonomy."

But, currently, the best driverless vehicle stock is Nvidia (NASDAQ: NVDA). The artificial intelligence (AI) technology leader isn't a pure play on autonomous vehicles, but neither is Alphabet, nor Tesla, nor most of the companies involved in this burgeoning market.

The driverless vehicle market has tremendous growth potential

Competition is fierce in the driverless vehicle space because this market promises to be humongous. Eventually, all the world's cars and trucks and probably most other forms of transportation will be autonomous. The big unknown is when fully autonomous vehicles will be legal across the United States and in other countries.

Autonomous vehicle market sizes and growth projections vary a lot depending upon what's included in the market and by source. One growth projection that falls in the middle of the range between conservative and extremely optimistic is by Precedence Research, which estimates the autonomous vehicle market will reach $4.45 trillion by 2034, which equates to a blistering compound annual growth rate (CAGR) of 36% over the next 10 years.

Don't get hung up on exact growth projections by any single source. The main point is that regardless of what's included in the market definition (cars and trucks, just cars, just the driverless vehicle tech and not the vehicle), growth projections across sources for the next 10 years and even longer are extremely robust. Most sources peg CAGRs in the low-30 percentages to the high-30s percentages.

Nvidia offers an end-to-end AI-powered driverless tech platform

Nvidia offers companies developing driverless vehicles or driverless vehicle technology in general a complete end-to-end solution. Its core offerings include:

• A data center AI supercomputer (DGX system): Used for training self-driving AI models. The company's AI chips -- graphics processing units (GPUs) -- comprise the core of this system.
• A simulation platform (Omniverse): Used for simulating various scenarios that driverless vehicles could encounter on the roads. Omniverse is also used by some automakers for building digital twins of their factories to help increase efficiency.
• An in-vehicle AI supercomputer (DRIVE AGX): These systems act as the "brains" of a vehicle. They process the massive amount of incoming data from the vehicle's various sensors and make driving decisions. They also can power a vehicle's cockpit. Nvidia's GPUs comprise the core of this system. These systems are used for "AI inferencing," which is the deployment of a trained application.

Companies can pick and choose what Nvidia tech they use in their driverless vehicle development programs. Tesla, for instance, uses Nvidia's tech for training its self-driving AI models, but doesn't use Nvidia's in-vehicle AI supercomputer. Tesla has been developing its own AI chip for inside its vehicles because the company believes it will provide it with a competitive advantage.

However, many companies use all Nvidia's driverless vehicle tech offerings. Some companies, however, do not fully disclose all the AI-powered driverless tech they are using.

There are two main reasons Nvidia is a fantastic way to invest in driverless vehicles:

Advantage No. 1: Nvidia is already profiting from the burgeoning driverless vehicle space

This advantage brings to mind the proverb "a bird in the hand is worth two in the bush."

By investing in Nvidia, investors have a company that is already profiting from the driverless vehicle space, rather than a company that just has potential, no matter how great that potential might be. (Though we don't know exactly to what degree Nvidia profits because it doesn't break out its profits by categories.)

Moreover, it seems highly likely that these profits will explode in size in the coming years because so many companies are developing with Nvidia's driverless vehicle tech. And a good number of them have inked well-defined partnerships that involve using Nvidia's tech inside each vehicle, or each vehicle of a certain model or models, they produce starting at a certain model year.

Meanwhile, Alphabet's Waymo, Tesla, Rivian, and countless other companies are spending money -- and huge sums of money, at that -- in their efforts to develop driverless vehicle technology, including for robotaxis in some cases.

Sure, Tesla is generating revenue when a Tesla vehicle buyer elects to purchase its "supervised full-self-driving" package, but we can bet that revenue pales compared to how much it's spending developing its autonomous driving tech.

Likewise, the same holds true for Waymo, which is now generating some substantial revenue from its paid robotaxi rides. As of April, it was providing more than 250,000 paid rides a week -- a fivefold increase from a year ago -- as management shared on the company's Q1 2025 earnings call. But the company's "other bets" category -- of which Waymo is widely assumed to be by far the largest component -- had an operating loss of $1.2 billion.

Advantage 2: Nvidia has a massive lead in the autonomous vehicle tech space

Here's an extremely powerful quote from CFO Colette Kress from Nvidia's quarterly earnings call in August 2024:

Automotive was a key growth driver for the quarter as every automaker developing autonomous vehicle technology is using Nvidia in their data centers. [Emphasis mine.] Automotive will drive multibillion dollars in revenue across on-prem[ises] and cloud consumption and will grow as next-generation AV [autonomous vehicle] models require significantly more compute.

Take this in: Every automaker that's developing driverless vehicle tech (and nearly all of them are) was using Nvidia's tech for AI training purposes as of last August. "Every"! This word should be music to the ears of Nvidia stock investors.

Kress' "multibillion dollars" refers to just revenue included in the company's data center platform. It doesn't include driverless vehicle tech revenue in Nvidia's auto and robotics platform, which includes sales of DRIVE AGX. Nor does it include the Omniverse offering for simulation, as this revenue falls into the professional visualization platform.

The number of companies that are developing autonomous vehicles or autonomous vehicle systems using Nvidia's tech must be in the thousands and includes automakers, truck makers, robotaxi developers, Tier 1 auto suppliers, software companies, and others.

But here's a sampling of major companies that are known to be using Nvidia's autonomous vehicle tech for both AI training and AI inferencing: Toyota (the best-selling automaker in the world), General Motors (the U.S.'s top-selling automaker), Mercedes-Benz, and Volvo Cars.

Moreover, the news for Nvidia investors gets even better: Nearly every larger Chinese EV maker -- including Warren Buffett-backed BYD Company and Nio -- has partnered with Nvidia to provide its driverless vehicle tech inside their vehicles, or at least in some models, in addition to using Nvidia's tech for AI training. These are big wins because the Chinese EV makers have recently been gaining significant EV market share in China and Europe. The more vehicles they produce, the more DRIVE supercomputers they will need to buy from Nvidia.

A final thought

I think it speaks volumes to the quality of Nvidia's AI-powered driverless vehicle tech that brands that have long been renowned for their focus on safety (Volvo Cars) and top-quality engineering (Mercedes-Benz) have partnered with Nvidia to put DRIVE AGX systems in their vehicles, in addition to using Nvidia's tech for training and simulation.

Higher-end vehicle brands are less likely to chance using anything but what they consider the best technology in their vehicles, as their ability to get premium prices for their vehicles depends heavily on maintaining their good reputations.

In short, not only is Nvidia stock the best overall AI stock, but also the best driverless vehicle stock.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post What's the best driverless vehicle stock? (Hint: It's not Tesla or Alphabet) appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• The growing case for this semiconductor ASX ETF
• ASX investors: Are you overinvested in the Magnificent 7 without knowing it?
• If I could buy only one ASX ETF for the next 10 years, this could be it
• Could this ASX ETF be the easiest way to invest in AI?
• 5 things to watch on the ASX 200 on Thursday

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Beth McKenna has positions in Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Nvidia, and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended BYD Company and General Motors. The Motley Fool Australia has recommended Alphabet and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Nvidia (NASDAQ: NVDA) held its GPU Technology Conference (GTC) 2025 last month in San Jose, California. The artificial intelligence (AI) chip leader's annual happening is widely considered the world's leading AI event.

I watched CEO Jensen Huang's two-hour keynote address in real time, caught a couple of his interviews, and viewed several panel discussions about AI and humanoid robots. Great information was shared during all these events, particularly Huang's keynote. It was chock-full of promising new product launches and partnerships, reinforcing my bullish view of Nvidia stock as a long-term investment.

But there was one incredibly bullish thing he said during GTC week that most investors probably aren't aware of. It wasn't uttered during his keynote or an interview, but at the GTC Financial Analyst Q&A on March 19.

Is Nvidia's AI business better than "just" recession-resistant?

A Wall Street analyst asked this question at the Q&A event: "If there's a recession, what does that do to your business? To AI demand?"

Huang's answer: "If there's a recession, I think that the companies that are working on AI are going to shift even more investment toward AI because it's the fastest growing [area/space]. Every CEO will know to shift toward what is growing."

I think a reasonable interpretation of his answer is that he's suggesting a recession should increase, or at least not decrease, demand for the company's AI-enabling products. Those products, collectively, garnered at least 87% of the company's total revenue in its most recent quarter, which ended in late January. (The data center segment's products are essentially all AI-enabling, and this segment took in about 87% of the company's revenue in the most recent quarter.)

Huang's answer might seem counterintuitive, but it makes sense upon reflection. CEOs, especially in certain industries, realize that AI investments are now so critical that they are a necessity. Innovations in AI are occuring so rapidly that companies that cut back on AI investments even for a relatively brief time will likely fall behind their competitors in AI capabilities. This could lead to an existential crisis from which they might not ever recover.

Let's say that Apple decided to cut back on its AI investments during the next economic downturn or full-fledged recession. It could risk potentially permanently losing some of its iPhone customers to competitors, namely makers of cellphones that use Alphabet's Android operating system. That would be a risky move, since the iPhone is its bread-and-butter product.

As Palantir CEO Alex Karp bluntly put it in the AI-powered data analytics company's third-quarter 2024 earnings release, "The world will be divided between AI haves and have-nots." Indeed, it seems probable that the AI haves, which could be companies or countries, will be winners, and the AI have-nots will be losers.

Nvidia is built to weather tough times

Data by YCharts. Data as of each company's most recently reported quarter. Free cash flow numbers are for the trailing-12-month period.

What if Huang's statement proves inaccurate and demand for AI-enabling products and services -- including Nvidia's -- decreases during the next economic downturn or recession?

Investors should fear not, as Nvidia's balance sheet is hardy. The company is in a better position than most of its peers and competitors to weather a downturn in demand leading to lower revenue, earnings, and cash flows.

As the chart shows, Nvidia's cash position and long-term debt are roughly equal at about $8.5 billion to $8.6 billion. Chipmaker Advanced Micro Devices (AMD) has more cash than long-term debt, so it's also in good shape in this respect. But chipmakers Broadcom and Intel have much more long-term debt than they have cash, so they're using a lot of cash to service their debt. This is an OK situation for Broadcom because it has strong cash flows, at least currently, but Intel is bleeding cash. Over the last year, Intel's free cash flow (FCF) was negative-$15.7 billion, almost double its cash on hand.

Nvidia is an FCF machine. Over the past year, it churned out $60.9 billion in FCF. It could easily use its cash flow to pay down, or even fully pay off, its long-term debt. But it makes sense that it doesn't do so. The company's big cash position coupled with its massive FCF provides it with many options for investing in long-term growth initiatives.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Is Nvidia's artificial intelligence (AI) business recession-resistant? appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• The growing case for this semiconductor ASX ETF
• ASX investors: Are you overinvested in the Magnificent 7 without knowing it?
• If I could buy only one ASX ETF for the next 10 years, this could be it
• Could this ASX ETF be the easiest way to invest in AI?
• 5 things to watch on the ASX 200 on Thursday

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Beth McKenna has positions in Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Advanced Micro Devices, Alphabet, Apple, Intel, Nvidia, and Palantir Technologies. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Broadcom and has recommended the following options: short May 2025 $30 calls on Intel. The Motley Fool Australia has recommended Advanced Micro Devices, Alphabet, Apple, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Artificial intelligence (AI) tech leader NVIDIA's (NASDAQ: NVDA) flagship GPU Technology Conference (GTC) 2025 has arrived. It will run Monday through Friday at the San Jose Convention Center in San Jose, California, the heart of Silicon Valley. This annual happening is widely considered the world's leading AI event. Nvidia expects about 25,000 attendees in-person and 300,000 virtually.

CEO Jensen Huang will deliver the keynote address at the SAP Center in San Jose on Tuesday, March 18, at 10 a.m. PT/1 p.m. ET. Folks who are not attending can watch virtually as the event will be livestreamed for free. (The livestream -- and a recording after the event -- will be accessible on Nvidia's investor relation website.)

Nvidia stock got a modest boost from last year's flagship GTC, as the chart below shows. Given the stock's pullback in 2025, investors are surely hoping for a repeat performance this year. (As of Friday, March 14, Nvidia stock is 18.6% off its all-time closing high, reached on Jan. 6.)

GTC 2024 was held Sunday, March 17, through Thursday, March 21, 2024. Friday, March 22, is included in the chart since many investors would still be digesting the data shared at the event, and some Wall Street analysts might still be tweaking their target prices. Data by YCharts.

What can investors expect from GTC 2025?

Investors can look forward to Nvidia announcing many new products and partnerships across its target markets: data center, gaming, automotive/robotics, and professional visualization (pro viz). The data center platform is likely to get the lion's share of conference time because it is Nvidia's largest and fastest-growing business. Moreover, it's the most heavily involved in AI.

For context, in the company's first quarter of fiscal 2026 (ended Jan. 26, 2025), the data center platform generated 90.5% of Nvidia's total revenue, with gaming, auto/robotics, and pro viz accounting for 6.5%, 1.4%, and 1.3%, respectively, of total revenue. (Total doesn't add up to 100% because Nvidia has a small "other" category.)

More specifically, investors can expect Nvidia to provide details about its next two generations of graphics processing units (GPUs) for processing AI and high-performance computing workloads: Blackwell Ultra and Rubin. Blackwell Ultra is slated to launch in the second half of this calendar year and Rubin -- which will have a new architecture -- is scheduled for a calendar-year 2026 release. Nvidia recently increased its cadence for launching new generations of data center GPUs to annually from about every other year.

Investors can expect Blackwell Ultra to have increased processing power compared to Blackwell, and can anticipate an even greater step-up from Blackwell Ultra to Rubin (named after American astronomer Vera Rubin). Demand for Nvidia's Blackwell chips has been "extraordinary," as Huang said on the company's fiscal Q1 earnings call in late February, and investors should be able to look forward to similarly powerful demand for Blackwell Ultra and Rubin.

Impressive slate of speakers

The event includes an impressive slate of speakers from:

• Nvidia and other big-name public companies ranging from the Big Techs to top consumer goods companies. I'm guessing some of the consumer products companies that will be represented are using Nvidia's tech to deploy AI agents, as the relatively new agentic AI space is taking off rapidly.
• Start-ups that have been garnering much attention recently, including OpenAI. OpenAI's late 2023 launch of its GPT chatbot demonstrated generative AI's amazing capabilities. This event triggered a stampede among companies to obtain Nvidia's GPUs for enabling generative AI.
• Academics and government officials working in AI and related realms.

For those interested in autonomous vehicles, I'll call out these speakers: RJ Scaringe, founder and CEO of Rivian and Drago Anguelov, V.P. and head of research at Waymo, Alphabet's driverless vehicle subsidiary.

I'm particularly looking forward to the speakers who will talk about robotics as I believe humanoid robots will be the next Big Thing (along with self-driving vehicles).

Quantum Day on March 20

Nvidia is holding its first Quantum Day at GTC on Thursday, March 20. Huang will host a panel of leaders from the quantum computing industry from 10 a.m. to 12 p.m. PT. This event will be livestreamed and available on demand.

The promise of quantum computing is that it will be able to solve problems that current classical computers cannot, but there are major "bugs" to be worked out. Nvidia is doing work in the quantum space along with partners. These partnerships are primarily aimed at developing "hybrid" computers that use classical chips (GPUs) and quantum chips (qubits).

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Nvidia's top AI event is here: Will Nvidia stock rise during March 18 through March 21? appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• The growing case for this semiconductor ASX ETF
• ASX investors: Are you overinvested in the Magnificent 7 without knowing it?
• If I could buy only one ASX ETF for the next 10 years, this could be it
• Could this ASX ETF be the easiest way to invest in AI?
• 5 things to watch on the ASX 200 on Thursday

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Beth McKenna has positions in Nvidia. The Motley Fool has positions in and recommends Alphabet and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet and Nvidia. The Motley Fool Australia has recommended Alphabet and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Nvidia (NASDAQ: NVDA) stock has been a great performer over the long term, though its performance notably revved up starting in 2023. From the start of that year through to today, Nvidia stock has gained almost 750%. The main catalyst has been powerful demand for the artificial intelligence (AI) chip leader's graphics processing units (GPUs) and related technology to enable generative AI, the tech behind the ChatGPT chatbot.

Nvidia has many competitive advantages, but one big one that probably flies under the radar of many investors is that employees really like working for the company.

Tech companies need top technical talent to prosper over the long run

Along with a highly capable top management team — which Nvidia has — a tech company also needs strong bench strength to succeed over the long run. Top tech talent, the folks who actually do the technical work, is rightfully often called the "lifeblood" of technology companies.

Nvidia, the other so-called big tech companies, and Nvidia's main semiconductor competitors are largely competing for the same tech talent — such as software engineers (also called software developers), hardware engineers, and computer scientists. People in these occupations are often in high demand and short supply. That's even more true with folks with educational or work experience in AI and other specialised areas, such as robotics.

Moreover, Nvidia and many tech companies are based in the same area: California's Silicon Valley. That makes competition for employees who work out of a Silicon Valley headquarters even more intense.

Nvidia: The best workplace among the big techs and key competitors per Glassdoor ratings

Since many tech companies are competing for employees with similar skills, it's a huge competitive advantage for a company to be considered an "attractive employer" or an "employer of choice." This is achieved by offering a good work environment, providing opportunities for advancement, and providing competitive compensation and benefits.

Nvidia gets top marks here, according to thousands of reviews by its employees and former employees on Glassdoor.com.

Data source: Glassdoor.com. I didn't include Amazon and Tesla because their workforce compositions are very different from the companies in this chart. Even though they both have significant tech operations, they also both have a large percentage of hourly employees who do manual labor. Data as of January 28, 2025.

Nvidia also outshines its competitors in the data centre AI GPU chip market, Advanced Micro Devices and Intel, according to Glassdoor. And it outscores Broadcom, with which it competes in high-performance networking technologies for AI-driven data centers. Broadcom's Glassdoor reviews are particularly weak in the category of company culture, or work environment. Part of this dynamic probably stems from Broadcom's heavy emphasis on growth by acquisitions. Like many companies that employ such a strategy, layoffs often follow each acquisition and sometimes precede them, too.

Data source: Glassdoor.com. Data as of January 28, 2025.

Broadcom's second-highest-frequency "con" in the reviews was "frequent layoffs and [reorganizations]." AMD's highest "con" was "there is always a downsizing somewhere." Intel's third most mentioned negative aspect was "frequent reorganizations and layoffs."

That Nvidia doesn't engage in layoffs is a big plus. Living with the job insecurity that surrounds possible layoffs is stressful and stressed people probably can't do their best work. Moreover, layoffs can negatively affect the morale of employees who are not let go. It seems safe to opine that employees, as a whole, are not apt to be as loyal and hardworking as they otherwise might be when they feel like they don't get loyalty in return.

Nvidia aims to be a "place where people can build their careers over a lifetime"

Nvidia's turnover rate is very low, as you might expect. In fiscal year 2023, its overall turnover rate was 5.3%. And in its annual report for fiscal year 2024, which ended in late January 2024, here's what the company said on this topic:

We want NVIDIA to be a place where people can build their careers over their lifetime. Our employees tend to come and stay. In fiscal year 2024, our overall turnover rate was 2.7%.

To be clear, Nvidia's very low turnover rate doesn't mean that it has not hired many new employees in recent years. It has. The company has been growing, so it's nearly always in a hiring mode.

In short, it seems probable that happy employees tend to be more loyal and hardworking. Happy employees tend to treat customers better. Happy employees tend to treat suppliers and subcontractors better. All these factors are important for a company's long-term success.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Nvidia has one huge competitive advantage that probably flies under the radar of many investors appeared first on The Motley Fool Australia.

More reading

• The growing case for this semiconductor ASX ETF
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• If I could buy only one ASX ETF for the next 10 years, this could be it
• Could this ASX ETF be the easiest way to invest in AI?
• 5 things to watch on the ASX 200 on Thursday

Beth McKenna has positions in Nvidia. 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. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, 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. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Advanced Micro Devices, Alphabet, Amazon, Apple, Intel, Meta Platforms, Netflix, Nvidia, and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Broadcom and has recommended the following options: short February 2025 $27 calls on Intel. The Motley Fool Australia has recommended Advanced Micro Devices, Alphabet, Amazon, Apple, Meta Platforms, Netflix, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

On Tuesday afternoon, President Donald Trump held a press conference to announce Stargate, a $500 billion artificial intelligence (AI) infrastructure project in the United States. He called it the "largest AI infrastructure project, by far, in history."

What you know about the Stargate project

Stargate is a joint venture between top tech companies Oracle, SoftBank Group, and OpenAI. Oracle is best known for its enterprise database software and cloud computing services. SoftBank, based in Japan, is an investment holding company that mainly invests in tech companies. OpenAI is the creator of ChatGPT, the chatbot that caused a sensation when it launched in late 2022. It showcased the amazing capabilities of generative AI, sparking a rush among companies to acquire generative AI capabilities.

Trump was joined at the conference by Larry Ellison, co-founder and executive chairman of Oracle; Masayoshi Son, SoftBank founder and CEO; and OpenAI co-founder and CEO Sam Altman.

Stargate will create over 100,000 American jobs, Trump said, emphasising that the project will be entirely in the United States. He added that he was "going to help a lot through emergency declarations." I think investors can take this to mean that he plans to lessen any regulatory hurdles that could slow the project's progression. He also mentioned that the "colossal" data centres could include on-site electricity generation. AI-enabled data centres are power hungry, so having adequate and dependable power is a major consideration.

Oracle's Ellison outlined the project's scope. Construction has started on 10 data centres being built in Abilene, Texas, which is about 180 miles west-southwest of Dallas. Each building will be a half a million square feet, which is bigger than seven regulation-size NFL football fields. The number of facilities will expand to 20 and there will be locations beyond Abilene, Ellison said. It wasn't clear to me if he meant there will be 20 facilities in Abilene and additional ones in other locations. He might have meant there will be 20 in total — 10 in Abilene and 10 in other locations. No matter, as the main takeaway remains that this is a massive AI infrastructure project.

SoftBank's Son talked about money and other partners. He said Stargate "will start immediately deploying $100 million" with the goal of bringing the total investment to $500 billion within the next four years, or by the end of Trump's term.

Investment firm MGX is an additional investing partner in Stargate, and Nvidia (NASDAQ: NVDA) is the joint venture's technology partner, said Son.

Nvidia is poised to get a big boost from the Stargate project

Nvidia is the leader, by far, in providing chips — its graphics processing units (GPUs) — and related technology for AI processing in data centres. So, even if SoftBank's Son had not specifically mentioned Nvidia by name, it would be obvious for investors following Nvidia that the Stargate project would almost surely be bullish for the company. This project is going to need a boatload of Nvidia's GPUs and related tech, which is going to add much revenue to the company's coffers.

Son referred to Nvidia as Stargate's "technology partner," but it's not clear if there is a true partnership relationship beyond Nvidia being a key supplier of AI-enabling technology to Stargate. Oftentimes in the tech world, company execs will use the term "partners" for their top suppliers even if technically they're simply suppliers.

Either way, Nvidia is poised to notably benefit from what Trump called the "largest AI infrastructure project, by far, in history."

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Nvidia stock investors just got fantastic artificial intelligence (AI) news from President Trump appeared first on The Motley Fool Australia.

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• 5 things to watch on the ASX 200 on Thursday

Beth McKenna has positions in Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Nvidia and Oracle. The Motley Fool Australia has recommended Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Last Thursday night, electric vehicle (EV) pioneer Tesla (NASDAQ: TSLA) unveiled its much-anticipated robotaxi -- actually, 21 of them -- called the Cybercab. The two-seater vehicle suggested a Tesla Model 3 in the front and the futuristic-looking Tesla Cybertruck in the rear. It's purpose-built as an autonomous vehicle, so it has no steering wheel or pedals.

As usual for a Tesla new product reveal, CEO Elon Musk whipped up a lot of excitement among investors and tech enthusiasts prior to the event. Fittingly, the event occurred at Warner Bros. Discovery's movie studio in Burbank, California, and indeed it was impressive from a theatrical standpoint.

Tesla's event was light on detail, resulting in Tesla stock dropping and ride-hailing stocks surging

Tesla stock dropped 8.8% on Friday, a day in which all major stock indexes rose, which didn't surprise me. When the event ended for streamers, my immediate thought was, "That's it?" (Tesla stock edged up slightly Monday and Tuesday, but it is still 8% lower as of Tuesday's market close than it was prior to the robotaxi event.)

While investors were dumping shares of Tesla on Friday, they were also buying shares of ride-hailing leaders Uber Technologies and Lyft, which surged 10.8% and 9.6%, respectively. Tesla provided scant details during its event about its plans to start a ride-hailing service using self-driving Tesla vehicles, which investors naturally viewed as positive news for Uber and Lyft, as these companies are well-positioned to be leaders in operating ride-hailing services using autonomous vehicles.

Musk's remarks lasted only about 20 minutes, at least for streamers. There were approximately 3.4 million of us watching on Tesla's X (formerly Twitter) feed. That said, the festivities did continue longer for attendees, who were served drinks by Optimus robots and could take a spin around the expansive movie studio set in a Cybercab or a driverless Tesla Model Y.

Given this critical take, it seems worth noting that I think I'm quite objective when it comes to Tesla. Indeed, my review of its second annual Artificial Intelligence (AI) Day, held in October 2022, was moderately positive. My two main takeaways:

Musk is well known for having many grandiose plans, some of which will probably not go beyond the development stage. That said, it seems more likely than not that Tesla will eventually sell humanoid robots [its Optimus robot] at scale.

Tesla investors have to like that Musk thinks big. Being an early entrant into any massive secular trend can provide a company with a considerable and often lasting early mover advantage.

Tesla greatly needs its Cybercab and ride-hailing service to be successful

Tesla has recently been struggling to grow EV sales, which stems from a slowdown in the overall EV market and increasing competition. It's been lowering prices to boost sales, which has hurt margins and earnings.

While the company's energy and "existing services and other" segments have been performing well, they are not likely to be enough to power Tesla stock higher over the long term. So, the company needs its Cybercab and ride-hailing service to be successful -- and it needs to launch this vehicle as soon as possible.

On that note, Musk said during the event that he expects Tesla to start production of the Cybercab "before 2027." That timeline seems overly optimistic, as does his expectation that the vehicle will cost "below $30,000." Musk also shared that he anticipates Tesla will begin operating fully self-driving vehicles -- Model 3s and Ys -- in California and Texas next year. Of course, this timeline will be dependent upon regulatory approvals.

Tesla is behind in the robotaxi space right now, but that doesn't mean it won't eventually catch up to or even eclipse the leaders, including Alphabet's Google, whose Waymo business has to be considered the leader in the United States.

Tesla stock investors will likely now be more demanding on October 23

Tesla is scheduled to report its third-quarter results after the market close on Wednesday, Oct. 23. After the disappointing robotaxi event, investors will probably be more demanding of Tesla's Q3 results and the data that Musk shares on the earnings call.

Tesla stock trades at 72 times forward earnings, a very lofty valuation for a company that Wall Street expects will grow earnings over the next five years at an average 12% to 15% annually, depending upon the source. Other valuation metrics also suggest a significantly overvalued stock. The stock's high valuation reflects that many investors expect Tesla to speed by Wall Street's earnings estimates, at least over the long term.

Tesla stock seems at risk of taking another big hit if Musk and his team don't overdeliver -- at least on what data is shared on the earnings call -- next Wednesday. Here are Wall Street's Q3 expectations for the top and bottom lines:

• Revenue of $25.33 billion, or growth of 8.5% year over year
• Adjusted earnings per share (EPS) of $0.58, or a decline of 12.1% year over year

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Tesla stock investors will likely be more demanding on October 23. Here's why appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Beth McKenna has no position in any of the stocks mentioned. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Tesla, Uber Technologies, and Warner Bros. Discovery. The Motley Fool Australia has recommended Alphabet. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Investors, of course, are concerned with Nvidia's future. Nobody can predict the future accurately, particularly in the fast-evolving technology world, but with a solid knowledge of Nvidia and the environment in which it operates, we can make some educated predictions.

Here are some predictions for what Nvidia's business will look like in five years.

1. CEO Jensen Huang will have recently retired or will be on the verge of doing so

For reference, Huang turned 61 earlier this year, according to public records, which would make him 66 in the summer of 2029.

As someone who regularly listens to Nvidia's earnings calls, it's obvious to me that Huang loves his work. Yet, it's grueling being the CEO of a massive company, particularly one that operates in the ultra-competitive cutting-edge tech realm. Huang has been leading the company since he cofounded it in 1993.

It would be fantastic for investors if Huang would lead Nvidia for as long as possible, as he's the company's No. 1 competitive advantage. (Maybe he could whip up a digital twin of himself using Nvidia's Omniverse platform!) Realistically, I think investors will be lucky if he continues as CEO for another four or five years, assuming he remains healthy enough. So, I'm going with the prediction that in five years, Huang will have recently stepped aside as CEO, or be on the verge of doing so. Hopefully, he'll transition to the role of chairman of the board, again, assuming he remains able.

This topic begs the question: Does Nvidia have a CEO succession plan in place?

2. Nvidia's GPUs will still dominate the AI chip space

It's widely accepted as fact that Nvidia has well over a 90% share of the market for advanced AI graphics processing unit (GPU) chips and more than an 80% share of the overall advanced AI chip market. (The latter category mainly includes custom chips -– or application-specific integrated circuits (ASICs) -- that many of the big tech companies have developed or are developing for specific use cases.)

Currently, the bulk of the most advanced AI chips are found in data centers, but they will eventually become more common in "edge applications," such as in cars and robots.

The type of dominance Nvidia enjoys is a wonderful thing for investors given how fast the AI chip market is growing and is projected to continue to grow. This market was already growing at a fast pace, which became a turbocharged pace with the advent of generative AI. This is the tech that has wowed the technology world since OpenAI launched its ChatGPT chatbot in late 2022.

In its fiscal year 2024 (ended Jan. 28), Nvidia's data center revenue skyrocketed 217% year over year -- or more than tripled -- to $47.5 billion. In its second quarter of fiscal 2025 (ended July 28, 2024), which it reported last week, data center revenue soared 154% year over year to $26.3 billion, accounting for 87% of the company's total revenue of $30 billion.

The bulk of data center revenue is generated from AI chips and related technology (software, networking equipment, and other hardware) that together enable AI applications. Nvidia is much more than simply a chip company. Indeed, one of its biggest competitive advantages comes from its huge ecosystem of developers using its CUDA software to develop AI applications.

Lisa Su, who is the CEO of Nvidia competitor Advanced Micro Devices, or AMD, projects the global market for chips to accelerate AI processing in data centers will reach $400 billion in revenue by 2027, which equates to a compound annual growth rate (CAGR) of 72.7%. Barring severe anti-competitive regulatory actions against Nvidia, I think it has the potential to capture the majority of this total addressable market (TAM) for a good number of years, with AMD, Intel, and makers of custom ASICs -- such as Broadcom -- combined capturing a lesser share.

3. Nvidia will make increasingly more money the closer driverless vehicles get to being legal across the United States

In 2029, I don't think fully autonomous vehicles will be legal across the U.S., but that they will be close to being so. The closer we get to legalization across the U.S. (and other countries), the more money Nvidia should make from this gigantic secular growth trend.

This comment from CFO Colette Kress during last week's fiscal Q2 earnings call summarizes how dominant Nvidia's AI-powered autonomous vehicle platform, DRIVE, is in this space:

Automotive was a key growth driver for the quarter as every automaker developing autonomous vehicle technology is using Nvidia in their data centers. Automotive will drive multibillion dollars in revenue across on-prem[ises] and cloud consumption and will grow as next-generation AV [autonomous vehicle] models require significantly more compute. [Emphasis mine]

4. The X factor

In my March 2020 article on the same topic as this one, I predicted that "Nvidia is incredibly innovative, so there seems a great chance that the company will introduce at least one major new technology that takes nearly everyone by surprise."

This prediction came to fruition in spades. Since that time, Nvidia launched the Omniverse, which enables companies to develop their own metaverses, and a slew of major innovations for enabling generative AI, a tech that nobody or just about nobody heard of in 2020. This is the nature of disruptive technology.

So, I feel extremely confident that within the next five years, Nvidia will have at least a few huge businesses -- meaning multibillion-dollar ones -- that are entirely new and that just about nobody (with the possible exception of some research scientists) can predict now.

5. Nvidia's stock will outperform the market

There is no way that anyone can accurately predict Nvidia's stock price in five years. A big unknown is the overall market performance over this period, which would greatly affect Nvidia stock's performance. A recession during this period is possible, for instance.

That said, given the predictions in this article, I feel confident that Nvidia stock will outperform the market over the next five years.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Where will Nvidia be in 5 Years? appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• The growing case for this semiconductor ASX ETF
• ASX investors: Are you overinvested in the Magnificent 7 without knowing it?
• If I could buy only one ASX ETF for the next 10 years, this could be it
• Could this ASX ETF be the easiest way to invest in AI?
• 5 things to watch on the ASX 200 on Thursday

Beth McKenna has positions in Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Advanced Micro Devices and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Broadcom and Intel and has recommended the following options: short November 2024 $24 calls on Intel. The Motley Fool Australia has recommended Advanced Micro Devices and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Artificial intelligence (AI) giant Nvidia (NASDAQ: NVDA) is slated to report its results for the second quarter of fiscal 2025 (ended July 28, 2024) on Wednesday, Aug. 28, after the market close.

Nvidia's upcoming earnings release is widely considered the most anticipated of this quarterly earnings season. That's because the company is viewed as a bellwether, or indicator, for the AI space and the overall market.

Nvidia dominates the rapidly growing AI chip market. If it delivers stronger-than-expected results -- particularly in its AI-driven data center business -- that suggests the broad AI market is probably more robust than widely believed.

Nvidia stock's performance has also become an indicator of the likely strength of the overall market. Nvidia is the second-largest stock on the S&P 500 index (behind Apple) and has been skyrocketing since early 2023, so it's been a huge driver of the index's overall performance.

My two-part prediction is that (1) Nvidia will beat Wall Street's earnings estimate, and (2) it will do so by at least 10%. We will get to where the 10% came from.

Nvidia's Q2 guidance and Wall Street's estimates

Data sources: Nvidia and Yahoo! Finance. Fiscal Q2 2025 ended July 28, 2024. *Reflects 10-for-1 stock split in June 2024. **Reflects the 10-for-1 stock split; calculation by the author based on the metrics for which management provided guidance.

Nvidia has a fantastic track record of exceeding Wall Street's earnings estimates, so the probability that it will do so on Wednesday seems high.

How strong is that track record?

Nvidia's earnings beat/miss track record

I reviewed Nvidia's quarterly results for the last four years, so 16 quarters. This data goes back to the second quarter of fiscal 2021, which ended in late July 2020. Below is the summary.

Data source: Nvidia. Calculations by author. *Earnings in the form of adjusted earnings per share (EPS). AI = artificial intelligence.

Let's home in on the five-quarter period in which generative AI (the tech behind Open AI's ChatGPT and other chatbots) became a major growth driver. Stock price movements are also included.

Data sources: Nvidia's earnings reports, Yahoo! Finance, and YCharts.

Key takeaways:

• Nvidia has exceeded Wall Street's earnings estimate in every quarter since generative AI became a major growth driver.
• Nvidia's earnings beats, on average, have become larger in, let's call it, the generative AI era.

Prediction: Nvidia will surpass Wall Street's earnings estimate by at least 10%

Last quarter, Nvidia beat the Street's earnings estimate by 10%. In the last five quarters -- the generative AI era -- the company's earnings beat has generally decreased in size: 10% (most recent), 12%, 19%, 32%, and 18%. So, I'm using the smallest earnings beat as my prediction. I'm using the smallest and not, say, the average because of the trend in the data.

The bigger picture: Nvidia stock is likely not as pricey as it might seem

Since generative AI entered the scene, Nvidia's earnings beats have become notably bigger (averaging 18%). I think this trend will continue.

The data in this article weakens the argument that goes something like: "Nvidia stock is overvalued because its forward price-to-earnings (P/E) ratio is X." (The forward P/E is 46.2, as of Aug. 26.) A forward P/E uses an estimate for the earnings value, generally Wall Street's. And those estimates are likely notably too low, which inflates the forward P/E.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Prediction: Nvidia will beat Wall Street's earnings estimate by 10% or more on Wednesday appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• The growing case for this semiconductor ASX ETF
• ASX investors: Are you overinvested in the Magnificent 7 without knowing it?
• If I could buy only one ASX ETF for the next 10 years, this could be it
• Could this ASX ETF be the easiest way to invest in AI?
• 5 things to watch on the ASX 200 on Thursday

Beth McKenna has positions in Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple and Nvidia. The Motley Fool Australia has recommended Apple and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The Nvidia (NASDAQ: NVDA) stock story keeps getting better, thanks primarily to the incredible demand for the company's graphics processing units (GPUs) and related technology that enable artificial intelligence (AI) capabilities. It's not too late to buy shares. Indeed, I just outlined 25 reasons to buy Nvidia stock now.

But there's a key question worth addressing that doesn't get much attention: When should you consider selling shares of Nvidia stock?

There are no "right" answers. Investors vary in terms of financial and personal factors. That said, below are three solid reasons for any investor to consider selling shares of Nvidia stock.

1. When CEO Jensen Huang no longer leads the company

Investors should consider selling at least some of their Nvidia shares when Huang no longer leads the company he co-founded in 1993. He reportedly turned 61 earlier this year and seems to love his work, so barring any health issues, he could be at Nvidia's helm for a good number of years more. To say that Huang will be difficult to replace is an understatement.

Nvidia is many years ahead of the competition in AI-enabling technology thanks to Huang's foresight. Starting more than a decade ago, he began to steadily use profits from Nvidia's once-core computer gaming business to position the company to be in the catbird seat when the "AI Age" truly arrived. And arrive it did in late 2022, when generative AI made a big splash on the tech scene with OpenAI's release of its ChatGPT chatbot. Generative AI greatly expands the potential applications for AI.

2. If and when the company's GPUs seem to be losing their AI-enabling "gold standard" status

A more exact (but too long) subheading is the above plus the following tacked on: "And if the company fails to develop whatever tech is knocking its GPUs from their lofty position."

Nvidia's GPUs are by far the favored chips for speeding up the training of AI models and the running of AI applications in data centers. Estimates vary, but it's widely projected that the company has more than a 90% share of the market for AI GPU chips for data centers, and more than an 80% share of the overall data center AI chip market.

This is a fantastic market to control. Advanced Micro Devices CEO Lisa Su projects that the global data center AI chip market will reach $400 billion in revenue by 2027, which would equate to a compound annual growth rate (CAGR) of more than 72% from its estimated size of $45 billion in 2023.

Nvidia's data center business accounted for about 87% of its total revenue last quarter, and some greater (but unknown) percentage of its total profits. So, investors should consider selling shares if signs start pointing to the company's tech being displaced as the gold standard for enabling AI processing in data centers.

How will we know? What signs will there be?

Other than staying abreast of the general space, there are two specific things investors can do. First, listen to Nvidia's quarterly earnings calls. Besides being interesting, Huang and CFO Colette Kress are very forthright. Recordings of these calls are posted on Nvidia's investor relations site, so you can listen at your leisure.

Second, monitor Nvidia's margins -- gross, operating, and profit, with special attention to gross margin. A company's margins will steadily decline when it's losing its competitive advantages. The key word is "steadily." Occasional short-term declines or ups and downs aren't usually reason for concern.

Below is Nvidia's 10-year margin history. There are ups and downs, but the overall trend has been decisively up. This is a winner of a margin profile chart. (I used trailing-12-month margins for all three margin types because this smooths out some of the quarterly ups and downs. But you can also use quarterly data, as that might be easier.)

Data by YCharts. Gross margin = gross profit/revenue. Operating margin = operating income/revenue. Profit margin = net income/revenue. Gross profit, operating income, net income, and revenue can all be found on a company's quarterly income statements.

3. To rebalance your investment portfolio

Nvidia stock has performed amazingly well over the long term, and particularly since 2023. So, in the last year and a half, it has no doubt grown to account for a much larger percentage of many investors' total portfolios.

No matter how terrific a company, it's risky to have too many of your eggs in one basket. That's especially true with technology stocks, which tend to be inherently more volatile than stocks of companies in more stable industries.

So, it makes good sense for investors to regularly -- perhaps, quarterly or annually -- rebalance their portfolio so no single stock becomes too large a holding relative to their total investments. "Too large" is highly subjective, so you'll have to decide what percentage range you're comfortable with. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Nvidia stock is still a great buy — but when should investors sell shares? appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• The growing case for this semiconductor ASX ETF
• ASX investors: Are you overinvested in the Magnificent 7 without knowing it?
• If I could buy only one ASX ETF for the next 10 years, this could be it
• Could this ASX ETF be the easiest way to invest in AI?
• 5 things to watch on the ASX 200 on Thursday

Beth McKenna has positions in Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Advanced Micro Devices and Nvidia. The Motley Fool Australia has recommended Advanced Micro Devices and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Nvidia (NASDAQ: NVDA) stock has been a superb performer over the short and long terms. The artificial intelligence (AI) chip leader held its initial public offering (IPO) in January 1999, six years after the company was founded. In honor of Nvidia stock turning 25 years old earlier this year, below are 25 reasons -- in no particular order -- to buy it.

As background, Nvidia has four market platforms: data center, gaming, professional visualization, and auto & robotics. Data center is its largest (accounting for 87% of revenue in its most recent quarter) and fastest growing due to surging adoption of AI, particularly generative AI. Generative AI exploded onto the scene in late 2022 with the release of the ChatGPT chatbot.

1. Company is run by a founder

Nvidia CEO Jensen Huang was one of the company's three co-founders. Studies show that stocks of founder-led companies tend to outperform others over the long term.

2. Founder-CEO has much skin in the game

Huang owns about 868 million shares of Nvidia stock following Friday's 10-for-1 stock split (discussed in No. 6), as of the most recent available data. This stake is worth about $105 billion, as of the stock's closing price on June 7. Given this massive stake, investors can be sure Huang's interest is aligned with their interests.

3. CFO's huge stock holdings suggest much confidence in Nvidia's future

CFO Colette Kress owns 6.43 million shares of Nvidia stock following Friday's 10-for-1 stock split (discussed in No. 6). These shares were worth about $777 million, as of June 7. A CFO probably has the best handle of everyone in a company -- including its CEO -- on its financial performance at any given time. So, it seems safe to say that Kress is very optimistic about Nvidia's growth prospects.

4. Nvidia stock's longer-term performance is phenomenal

Over the last 10 years, Nvidia stock has returned 25,431% through June 7. That's more than 100 times the S&P 500 index's return of 230%. Put another way, a $1,000 investment in Nvidia stock a decade ago would now be worth more than $250,000.

A stock's past performance is no guarantee of its future performance. However, a stock's long-term performance often reflects the ability of a company's top management to establish and implement successful strategies.

5. AI market is projected to continue to grow briskly

In 2024, the global AI market is projected to reach revenue of $184 billion, and have a compound annual growth rate (CAGR) of 28.5% through 2030, when it will be worth an estimated $826.7 billion, according to Statista.

This is a huge positive for Nvidia, whose graphics processing unit (GPU) chips and related products and services are used for training and deploying AI applications.

6. Nvidia's 10-for-1 stock split just occured on June 7

On Friday, June 7, Nvidia stock split 10-for-1. Investors who owned the stock as of the day before received nine additional shares for each share they owned. The stock is scheduled to begin trading on a split-adjusted basis on Monday, June 10.

On Friday, Nvidia stock's closing price was $1,208.88, which means that its split-adjusted price was $120.89.

Potential benefits for investors of Nvidia's stock split include a boost in price from greater demand for shares, and a higher chance at being included on the Dow Jones Industrial Average index.

7. The company dominates the data center AI chip market

It's widely estimated that Nvidia has more than a 90% share of the market for AI GPU chips for data centers, and more than an 80% share of the overall data center AI chip market.

8. Data center AI chip market is projected to continue to grow like gangbusters

In 2023, the global market for chips to accelerate AI processing in data centers was worth about $45 billion, according to an estimate by Advanced Micro Devices (NASDAQ: AMD) CEO Lisa Su. She projects this market will reach $400 billion in revenue by 2027, which equates to a blistering CAGR of 72.7%.

9. Nvidia's data center business has strong competitive advantages

Advanced Micro Devices (AMD) and Intel have recently entered Nvidia's turf -- AI-enabling GPUs for data centers. Investors shouldn't be overly concerned. Nvidia's competitive advantages don't only stem from its GPUs, but also its software, particularly CUDA, which has been used by millions of developers for many years. CUDA enables its GPUs to possess the parallel processing capabilities needed for accelerating general and AI computing.

10. Its revenue is growing rapidly

Nvidia's year-over-year revenue growth over the last four quarters starting with the most recent quarter: 262%, 265%, 206%, and 101%.

11. Its profits are increasing even faster than revenue

Nvidia's adjusted earnings per share (EPS) are growing faster than its revenue, which reflects its expanding profit margins. This dynamic is being driven by its highly profitable data center business growing faster than its other businesses. Here's the company's year-over-year adjusted EPS growth over the last four quarters starting with the most recent quarter: 461%, 486%, 593%, and 429%.

12. Its free cash flow is also growing rapidly

Nvidia's year-over-year free cash flow (FCF) growth over the last four quarters starting with the most recent quarter: 465%, 546%, N/A (FCF was negative in year-ago period), and 634%.

13. Wall Street expects strong profit growth over the next 5 years

As of June 7, Wall Street projects that Nvidia will grow adjusted EPS at an average annual rate of 46.5% over the next five years.

14. Nvidia nearly always beats Wall Street's expectations

Nvidia nearly always beats Wall Street's quarterly earnings estimates -- and oftentimes, by a lot. In the prior four quarters, the company's adjusted EPS has exceeded the analyst consensus estimate by percentages ranging from 10% to 29%.

If this dynamic continues, Nvidia's CAGR over the next five years will be higher than the 46.5% that analysts now expect.

15. The stock's valuation is reasonable

At Friday's closing price, Nvidia stock is priced at 44.6 times forward estimated earnings. In a vacuum, this is a high valuation. But it's reasonable for a company that Wall Street expects to grow adjusted EPS 109% this fiscal year and at an average annual rate of 46.5% over the next five years. Moreover, analysts are likely underestimating its growth potential, as covered above.

16. It's much more profitable than its main competitors and peers

List is not all-inclusive. Data sources: YCharts and finviz.com. GAAP = generally accepted accounting principles. TTM= trailing 12 months.

17. It's reportedly forming a custom chip business unit

Sources have reported and signs suggest that Nvidia is forming a custom chip business unit so that it can capture some of the custom chip development work for big tech companies that currently goes to chipmakers such as Broadcom. The new unit will reportedly help companies design custom chips for AI and other applications.

18. It's the largest supplier of graphics cards for gaming

Gaming is Nvidia's second largest market platform, accounting for 10% of its revenue in its most recent quarter. The company is the world's largest supplier of graphics cards for computer gaming. In the first quarter of 2024, it had an 88% share of the desktop discrete GPU market, according to Jon Peddie Research. AMD and Intel had a 12% and less than 1% share, respectively.

19. PC gaming market is projected to continue its solid growth

In 2023, the global personal computer (PC) gaming market generated about $80.3 billion in revenue, according to Statista, which projects this market will be worth $141.9 billion in 2028. That equates to a CAGR of about 12.1%.

20. Nvidia generates some recurring revenue

Nvidia has relatively recently begun launching software and service offerings that generate recurring revenue. In February, CFO Kress said that in fiscal Q4 the company's software and services offerings reached an annualized revenue run rate of $1 billion.

21. Its revenue should get a big boost when driverless vehicles become legal

Nvidia's revenue should get a big boost when driverless vehicles become legal across the U.S. and world. Hundreds of vehicle manufacturers, tier 1 suppliers, and others are developing on the company's autonomous vehicle AI computing platform, DRIVE.

When Nvidia's partners use its DRIVE platform in production vehicles, they need to buy a DRIVE AI computer for each vehicle. Its big-name partners include luxury vehicle maker Mercedes-Benz and electric vehicle (EV) giant BYD.

22. Its sovereign AI business has multibillion-dollar potential

Nations and other sovereign entities have relatively recently begun using Nvidia's technology to build their own sovereign AI cloud services. The "sovereign AI infrastructure market represents a multibillion-dollar opportunity over the next few years," CFO Kress said last November on the company's fiscal Q3 2024 earnings call.

23. It just ramped up its robotics initiatives

In March, Nvidia introduced it Project GR00T (Generalist Robot 00 Technology) AI foundation model for humanoid robots and major updates to its Isaac robotics platform.

24. Its balance sheet is in solid shape

At the end of the last quarter, Nvidia had cash and cash equivalents of $7.6 billion and long-term debt of $8.5 billion.

25. Employes really like working for Nvidia

On Glassdoor.com, Nvidia employees and former employees give the company an overall rating of 4.6 stars (on a scale of 1 to 5), as of June 7. Employee satisfaction is particularly important for companies in the technology realm, as there is a limited amount of top tech talent. Nvidia's rating is the highest of all the so-called Big Tech companies.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post 25 reasons to buy Nvidia stock now appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• The growing case for this semiconductor ASX ETF
• ASX investors: Are you overinvested in the Magnificent 7 without knowing it?
• If I could buy only one ASX ETF for the next 10 years, this could be it
• Could this ASX ETF be the easiest way to invest in AI?
• 5 things to watch on the ASX 200 on Thursday

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Advanced Micro Devices, BYD Company, Nvidia, and Qualcomm. Beth McKenna has positions in Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Broadcom and Intel and has recommended the following options: long January 2025 $45 calls on Intel and short August 2024 $35 calls on Intel. The Motley Fool Australia has recommended Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Nvidia (NASDAQ: NVDA) stock is having another great year. In 2024, shares of the artificial intelligence (AI) tech giant have gained 91.9% through May 15, crushing the S&P 500 index's 11.9% return. The stock's longer-term performance is even more stunning, as it turned an investment of $5,000 into nearly $1 million over the last decade through April 29.

A catalyst that might propel Nvidia stock higher is coming on Wednesday, May 22, after the market close. That's when the company is scheduled to release its results for its quarter ended on April 28.

Given Nvidia stock's fantastic recent performance, expectations are high and built into the stock price. For the stock to rise after the report, the company will likely have to at least comfortably beat Wall Street's estimates for the quarter and issue guidance for the next quarter that's notably higher than analysts are projecting.

What are Wall Street's expectations?

You can use the below chart to gauge Nvidia's fiscal first-quarter results.

Data sources: Nvidia and Yahoo! Finance. Fiscal Q1 2025 ended April 28, 2024. *Calculated by the author based on the metrics for which management provides guidance. Data as of May 15, 2024.

The below chart can be used to gauge Nvidia's guidance for its fiscal second quarter.

Data sources: Nvidia and Yahoo! Finance. Fiscal Q2 2025 ends in late July 2024. Data as of May 15, 2024.

Two reasons Nvidia seems poised to beat Wall Street's expectations

The first reason Nvidia looks poised to beat Wall Street's estimates has to do with management "visibility." Nvidia's top management team has said on the company's recent quarterly analyst earnings calls that it has good visibility into near-term sales in its data center business. That's because the company has a backlog of orders to fulfill due to demand being so strong for its AI-enabling data center chips and related products.

Management probably has less of a handle on near-term demand for products in some of its other businesses. But that doesn't matter much because data center is by far Nvidia's largest market platform, and so it drives overall results.

The better management's visibility into near-term sales, the better idea it has of its near-term financial results. You can be sure Nvidia's savvy top management team set fiscal Q1 guidance at levels it feels very confident the company will exceed. Wall Street analysts use Nvidia's guidance to help establish their estimates. For many years analysts have underestimated the company's growth potential, and my bet is this dynamic will continue.

The second reason that Nvidia's upcoming report -- including from a fiscal Q2 guidance standpoint -- seems poised to be better than analysts expect stems from the recent quarterly reports of several of Nvidia's biggest customers. Companies such as Facebook parent Meta Platforms, Alphabet, and Microsoft are continuing to ramp up their already significant spending on AI initiatives, which is a positive for Nvidia.

For instance, Meta now expects its full-year 2024 capital expenditures to range from $35 million to $40 million, up from its prior plan of $30 million to $37 billion. This is due to the company continuing to "accelerate our infrastructure investments to support our AI roadmap," CFO Susan Li said on the Q1 earnings call.

Should you buy Nvidia stock before May 22?

Of course, there are no guarantees, but I think it's more likely than not that Nvidia stock will rise after the upcoming earnings release for the reasons just outlined. And there's another possible catalyst: The timing seems good for the company to announce a stock split.

That said, if you're a long-term investor, you don't need to concern yourself with trying to time your stock buys. Over the long term, if your bullish thesis is correct for Nvidia, it shouldn't make that much difference if you paid a bit more or less for its stock many years back.

Let's look at an example. Nvidia stock closed at $946.30 per share on May 15. Exactly five years ago, the stock closed at $39.90, adjusted for stock splits. If you invested $1,000 in Nvidia stock five years ago, your investment would now be worth $23,717. Had you invested in the stock about five years ago and its price per share was, say, 15% higher than $39.90, or $45.89, your investment would now be worth $20,621. I'm guessing you'd be thrilled to have turned your $1,000 into nearly $21,000 in five years, and not kicking yourself for not doing a little better.

A smart way to build your position in any stock is to invest the same dollar amount at regular intervals, such as monthly or quarterly. This method eliminates the potential that you'll invest your entire amount at what turns out to be a near-term peak for the stock price. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Nvidia stock's next big catalysts could come on May 22. Should you buy shares before then? appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• The growing case for this semiconductor ASX ETF
• ASX investors: Are you overinvested in the Magnificent 7 without knowing it?
• If I could buy only one ASX ETF for the next 10 years, this could be it
• Could this ASX ETF be the easiest way to invest in AI?
• 5 things to watch on the ASX 200 on Thursday

Beth McKenna has positions in Nvidia. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. 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. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Meta Platforms, Microsoft, and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Alphabet, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Last week, electric vehicle pioneer Tesla Inc (NASDAQ: TSLA) turned in a third-quarter report that was strong overall, though revenue came in a little lighter than Wall Street had expected.

Revenue grew 56% year over year to a quarterly record of $21.45 billion, driven by a 55% increase in automotive segment revenue, which came in at $18.7 billion. The Street was looking for total revenue of $21.96 billion. 

Tesla also set quarterly records for vehicle production and deliveries, which jumped 54% and 42%, respectively, year over year. It also set records for operating profit and free cash flow, among other metrics. Moreover, its adjusted earnings per share (EPS) soared 69% year over year to $1.05, beating the $1.00 analyst consensus estimate. 

Earnings releases tell only part of the story. Here are two key things management shared on Tesla's Q3 earnings call that investors should know. 

Aiming to produce 50,000 Tesla Semi trucks in North America in 2024

From CEO Elon Musk's remarks:

So we'll be handing over our first production Tesla Semis to Pepsi on December 1. ... We're tentatively aiming for 50,000 units in 2024 for Tesla Semi in North America. And obviously, we'll expand beyond North America.

The Tesla Semi is an all-electric heavy (Class 8) truck that the company unveiled in 2017. It had originally planned to begin producing this vehicle in 2019, but it pushed the date back so it could focus for some time on manufacturing Model 3 sedans, which have garnered tremendous demand from consumers.

Earlier this month, Musk tweeted that the company had begun producing the Semi and would deliver the first batch to PepsiCo Inc (NASDAQ: PEP) on December 1. He didn't specify in that tweet or on the earnings call how many units would be in the initial delivery. The food and beverage behemoth reportedly reserved 100 Semi trucks soon after Tesla unveiled this vehicle.

On the call, Musk clarified that the Tesla Semi's range of 500 miles was with the cargo and travelling on a level road. Yes, that invites a question about how much cargo weight it can carry and still achieve that 500-mile range.

But regardless of the exact weight, the main point holds that a fully electric heavy truck with a range in the ballpark of 500 miles should garner significant demand. That is, assuming this truck operates well overall and its price is not astronomical.

Energy storage business has the potential to grow 150% to 200% per year

From Musk's remarks:

[To transition to sustainable energy,] you need solar [and] wind with the stationary battery pack to buffer the power so you have 24/7 power. [That's] because the wind doesn't blow all the time and the sun doesn't shine all the time.

We actually see the energy storage business, stationary storage, growing more like 150% to 200% a year, much faster than cars by a lot.

For context, in the third quarter, Tesla's energy generation and storage segment's revenue rose 39% year over year to $1.1 billion, or about 5% of total revenue. By comparison, the core auto segment's revenue surged 55% year over year. 

Growth in the energy generation and storage segment was driven by a 66% increase in energy storage capacity deployments to a record 2.1 gigawatt hours (GWh).

However, it's important to note that demand for Tesla's energy storage products has been greater than the company's ability to produce them. The global semiconductor shortage has hurt its energy storage business more than its auto business, according to Tesla's Q3 shareholder letter. 

On the call, Tesla CFO Zachary Kirkhorn said that the energy segment achieved its highest gross profit ever in the third quarter, driven primarily by record volumes of the Megapack and Powerwall stationary storage products. That metric was $104 million, according to my calculations. This is just 1.9% of Tesla's total Q3 gross profit of $5.38 billion, but at least the energy segment had a gross profit. This has not always been the case. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post 2 Elon Musk quotes from Tesla's earnings call that investors should see appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• ASX investors: Are you overinvested in the Magnificent 7 without knowing it?
• Is this the easiest way to invest in the SpaceX IPO on the ASX?

Beth McKenna has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Tesla (NASDAQ: TSLA) stock is down 7.2% on Thursday as of 9:52 a.m. ET, following the electric vehicle pioneer's release of its third-quarter report yesterday.

The stock's drop is probably largely attributable to the quarter's revenue coming in a little lighter than Wall Street's consensus estimate. Given the challenging market conditions in 2022, many investors are reacting more unfavorably to even relatively minor blips in quarterly earnings reports than they did when the market was in a bull mode. 

There was much to like about the report. Adjusted earnings per share (EPS) beat the analyst expectation, and revenue, operating profit, and free cash flow set quarterly records.

The following is an overview of Tesla's third quarter centered on seven key metrics.

1. Revenue surged 56%

Quarterly revenue grew 56% year over year to $21.45 billion. This result fell short of the $21.96 billion Wall Street consensus estimate.

Revenue growth was primarily driven by increased vehicle deliveries and a higher vehicle average selling price, partially offset by the strengthening of the US dollar relative to other currencies. Tesla's clean energy and services/other businesses also contributed to growth. 

Segment year-over-year revenue performance was as follows:

• Automotive segment revenue grew 55% to $18.7 billion.
• Energy generation and storage revenue rose 39% to $1.1 billion. Growth was driven by a 66% increase in energy storage capacity deployments to a record 2.1 gigawatt hours (GWh) and a 13% increase in solar power deployments to 94 megawatts (MW).
• Services and other revenue rose 74% to $1.6 billion. Growth was driven by used car and part sales along with a more than threefold increase in paid use of Superchargers.

2. Vehicle production and deliveries grew 54% and 42%, respectively

In Q3, Tesla produced 365,923 vehicles (about 20,000 Model S and X units and 346,000 Model 3 and Y units), up 54% from the year-ago period.

And it delivered 343,830 vehicles (about 19,000 Model S/X and 325,000 Model 3/Y), up 42% year over year.

3. Auto gross margin was 27.9%

In Q3, automotive gross margin (gross profit divided by revenue) based on generally accepted accounting principles (GAAP) was 27.9%. While this is a strong auto gross margin, it was down from 30.5% in the year-ago period. Sequentially, it was flat, as it was also 27.9% in the second quarter. 

4. Operating income rocketed 84%

In Q3, operating income grew 84% year over year to $3.7 billion. Operating margin (operating income divided by revenue) landed at 17.2%, up from 14.6% in the year-ago period. 

5. Adjusted EPS soared 69%

GAAP net income was $3.3 billion, or $0.95 per share, up 98% from the year-ago period. Adjusted for one-time items, net income came in at $3.7 billion, or $1.05 per share, up 69% year over year. This result surpassed the $1 adjusted earnings per share (EPS) that analysts had expected.

6. Operating cash flow jumped 62%

In Q3, cash generated from operations grew 62% year over year to $5.1 billion. Free cash flow skyrocketed 148% to $3.3 billion.

Tesla ended the quarter with $21.1 billion in cash, cash equivalents, and short-term investments, up by $2.2 billion from the prior quarter. 

7. Supercharger stations increased 32%

Tesla continued its solid pace of building out its network of Supercharger stations. It ended the quarter with 4,283 stations, up 32% from the year-ago period. Supercharger connectors grew 33% year over year to 38,883. 

A great quarter with a new revenue source coming soon

Tesla turned in a great quarter. The company recently began production of its all-electric Class 8 truck, the Tesla Semi, at its Gigafactory in Nevada. It plans to begin deliveries to PepsiCo in December. The beverage and food giant reportedly reserved 100 of these trucks soon after Tesla unveiled this vehicle in 2017.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Tesla stock drops on earnings release: 7 key metrics you should see appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Beth McKenna has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Tesla (NASDAQ: TSLA) stock is one of the most followed stocks in the market. That's not surprising given shares of the electric-vehicle (EV) pioneer have performed phenomenally over the longer term. 

Shares have rocketed from their initial public offering (IPO) split-adjusted price of about $1.13 in June 2010 to $204.99 on Oct. 14, 2022. This performance has transformed an initial investment of $1,000 into about $181,407. By comparison, the S&P 500 index has turned a $1,000 investment into $4,250 over this period.

Before considering investing in Tesla, you should make sure you have a good handle on how it makes its money.  

Where is Tesla's revenue coming from? 

The two charts that follow are derived from the company's second-quarter results. In the quarter, total revenue jumped 42% year over year to $16.9 billion and adjusted net income surged 62% to $2.62 billion, which translated to earnings per share increasing 57% to $2.27.

Data source: Tesla. *Calculated by author.

The auto category includes sales and leasing of new models of the company's four EVs, the Model S sedan, the Model X SUV, the Model 3 sedan, and the Model Y crossover. These EVs are equipped with Tesla's advanced driver-assistance system, Autopilot, whose capabilities are increased via over-the-air software updates. 

Tesla recently released its vehicle production numbers for the third quarter. In Q3, it produced 365,923 vehicles and delivered 343,830 vehicles. These numbers were up 54% and 42%, respectively, from the year-ago period.

The energy generation and storage business sells solar panels and solar roof tiles for homes, and energy-storage products for residential, commercial, and electric utility grid use. 

Tesla's services and other segment includes a variety of items, the most notable being non-warranty after-sales vehicle services and sales of used vehicles.

Where is Tesla's gross profit coming from?  

Data source: Tesla. *Calculated by author. Gross margin = gross profit divided by revenue. Numbers based on generally accepted accounting principles (GAAP).

In the second quarter, Tesla's auto segment accounted for 85% of its total revenue and an outsized 96% of its total gross profit. So, at this point, investors following the stock just need to pay attention to the auto business.

The energy generation and storage business has huge potential, thought its current contribution to the company's profit is close to insignificant. 

What's going on with services and other? Don't be concerned about this seemingly laggard of a category. Tesla doesn't aim to make money on some of the larger components of this category, notably on vehicle servicing. So, this category can be thought of as supporting the auto segment.

Tesla still has a long runway for growth

Tesla's core electric car business still has massive growth potential. Consider that at the end of 2021, the percentage of the world's light-duty vehicles on the road that are all-electric or plug-in hybrids was less than 2%.

Beyond its existing electric car and energy generation/storage businesses, Tesla has other avenues for growth. On the immediate horizon is the launch of its Semi Truck. On Oct. 6, CEO Elon Musk tweeted that Tesla is starting production of this electric Class 8 truck, which reportedly has a range of 500 miles. He said that PepsiCo will get its initial deliveries (quantity not specified) on Dec. 1. 

Investors will get material news soon: Tesla is slated to report its Q3 results after the market close on Wednesday, Oct. 19. An analyst conference call is scheduled for the same day at 5:30 p.m. ET. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post How does Tesla make money? appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• ASX investors: Are you overinvested in the Magnificent 7 without knowing it?
• Is this the easiest way to invest in the SpaceX IPO on the ASX?

Beth McKenna has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The transformation of the world's vehicle fleet to being powered by electricity is one of today's biggest growth trends. In 2021, sales of new light-duty fully electric vehicles (EVs) nearly doubled in the United States from the prior year, while overall light-duty vehicle sales increased by only 3%, according to government figures. International EV growth was also strong. 

The great news for investors is that this secular trend is still in its early stages. The percentage of the world's light-duty vehicles on the road that are all-electric or plug-in hybrids is still very low. At the end of 2021, this figure was less than 2%. 

Tesla, Inc. (NASDAQ: TSLA) was instrumental in ushering in the EV revolution and still has a potentially long runway for growth. Investors also have many other options to gain exposure to this space. Two stocks that have strong long-term growth potential are those of lithium producer Albemarle Corporation (NYSE: ALB) and EV maker Rivian Automotive, Inc. (NASDAQ: RIVN).

Albemarle: A profitable and dividend-paying EV play

There are many publicly traded companies involved in the EV supply chain, but not many are profitable, pay a dividend, and have substantial current exposure to EVs. Albemarle fits this bill. 

The U.S.-based company is one of the world's top producers of lithium, a component of the lithium-ion batteries that power EVs. While it's not an EV pure play, its lithium business is the largest of its three segments (it accounted for 60% of total sales in the second quarter), and the bulk of the lithium it produces is used to make EV batteries.

Albemarle's results have come roaring back following being hurt during the earlier stages of the pandemic. Excluding the fine chemistry services segment it sold last year, sales have surged 98% over the one-year period through the second quarter. The main driver has been the rocketing price of lithium, whose supply is tight and seems poised to stay that way for some time. In Q2, revenue and adjusted earnings per share jumped 91% and 288%, respectively, year over year.

Albemarle stock's dividend is yielding 0.55%, as of the market's close on Sept. 23. Even a modest dividend can make a big difference over time. Over the last decade, the stock's total return was 488% (versus 207% for the S&P 500) -- and 82 percentage points were contributed by the dividend. 

Rivian: A promising relatively newly public EV maker 

The number of pure-play EV makers that have gone public in recent years keeps growing. Rivian is one of the newcomers that has a good shot at surviving and thriving. It's a U.S.-based company that held its initial public offering in November 2021. 

Rivian was the first company to launch a mass-produced electric pickup truck, which should give it a first-mover advantage. Its partnerships with two big names should also prove to be positives. It has an order from Amazon.com, Inc.(NASDAQ: AMZN), which owns a sizable stake of Rivian, to produce 100,000 custom-designed electric delivery vans. And earlier this month, the company and premium automaker Mercedes-Benz announced plans to create a joint venture to build a European factory that will manufacture electric vans for both companies.

Demand for Rivian's vehicles is robust, but its production has been constrained by the supply shortage that has plagued the auto industry. Last month, management said this issue has begun to ease and reaffirmed its 2022 production forecast of 25,000 total vehicles. 

In the second quarter, Rivian produced 4,401 vehicles and delivered 4,467 vehicles. These numbers were up from 2,553 and 1,227, respectively, in the first quarter. It ended the quarter with about 98,000 preorders from U.S. and Canadian consumers for its two consumer vehicles, the R1T pickup and R1S SUV. 

Investors should keep a close watch on Rivian's production numbers and its liquidity situation. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post 2 high-growth electric vehicle stocks to consider buying (other than Tesla) appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• ASX investors: Are you overinvested in the Magnificent 7 without knowing it?
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Beth McKenna has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon and Tesla. The Motley Fool Australia has recommended Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

On Friday, the European Central Bank (ECB) announced that it had selected e-commerce giant Amazon.com, Inc. (NASDAQ: AMZN) and four other entities to develop user interface prototypes for a possible digital version of the euro.

A digital version of the euro -- or of any other major central bank digital currency (CBDC), such as the U.S. dollar -- would likely have investing implications throughout the financial sector. This includes implications for cryptocurrencies, digital currencies that fall outside the domain of central banks or any centralized authorities. 

The focus of this article is on what this development could mean for Amazon.

The Digital Euro Project's prototyping phase

Along with Amazon, the ECB selected CaixaBank, Worldline, the European Payments Initiative (EPI), and Nexi to help it develop potential user interfaces for a digital euro. It selected them from a pool of 54 applicants because it believes they can best address the "specific capabilities" required for an assigned use case for a digital euro. They will not be financially compensated for their prototyping work.

The non-Amazon names are probably new to many U.S. investors. They're all based in Europe, and none are listed on a major U.S. stock exchange. Indeed, it seems a telling indication of Amazon's global e-commerce dominance that it's the only one of the five chosen entities based outside the eurozone. 

According to a press release by the ECB, the aim of the prototyping stage of the Digital Euro Project is "to test how well the technology behind a digital euro integrates with prototypes developed by companies. Simulated transactions will be initiated using the front-end prototypes developed by the five companies and processed through the Eurosystem's interface and back-end infrastructure." (The Eurosystem is comprised of the ECB and the national central banks of the eurozone.) 

Amazon's focus, of course, will be on e-commerce payments. Spain-based CaixaBank, France's Worldline, and Italy's Nexi will concentrate on peer-to-peer online payments, peer-to-peer offline payments, and point-of-sale (POS) payments initiated by the payee, respectively. EPI, comprised primarily of numerous banks and credit institutions across Europe, will focus on POS payments initiated by the payer.

The Digital Euro Project's timeline

The ECB expects the user-interface prototyping phase of the Digital Euro Project, which launched in July 2021, to be completed by the first quarter of 2023. It plans to publish its findings in that quarter.

After the two-year investigation phase of the project ends in October 2023, the ECB will decide whether to start developing a digital version of the euro. The implementation phase, if applicable, is expected to last about three years. So a digital euro could arrive in the fall of 2026 or thereabouts.

How could Amazon benefit from its involvement in the Digital Euro Project?

It's too early to do more than just broadly speculate as to how Amazon could benefit from its involvement in the ECB's exploration of the development of a digital euro. That said, being involved in the early stages of a groundbreaking project definitely has potential upside for the company's business.

Should a digital euro come to fruition, Amazon might have an edge on its competitors in that its internal systems would be ready to handle digital euro transactions. And the company might be able to leverage what it learns from its digital euro work to help improve its current products and services or expand into new arenas.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Move over, cryptocurrencies: a digital euro could be coming with help from Amazon appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• ASX investors: Are you overinvested in the Magnificent 7 without knowing it?
• 3 ASX shares riding the data centre boom that investors keep overlooking
• Berkshire Hathaway just sold these stocks

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Beth McKenna has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon. The Motley Fool Australia has recommended Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.