Nvidia (NVDA -3.22%) did it again.
The AI chip superstar delivered another round of smashing results, easily beating estimates in its third-quarter earnings report on Nov. 20.
Revenue jumped 94% in the quarter to $35.1 billion, which topped the consensus at $33.1 billion, and adjusted earnings per share (EPS) more than doubled from $0.40 to $0.81, ahead of estimates at $0.75.
Shares pulled back slightly on the news as investors have gotten accustomed to the chip titan regularly besting expectations, and some analysts wanted to see stronger fourth-quarter guidance, which called for $37.5 billion in revenue — a 70% increase from the quarter a year ago.
At the time of this writing, Nvidia is now worth $3.5 trillion. It’s the most valuable company in the world, but it’s only natural to wonder if it will be the first to make it to the $4 trillion milestone. That seems likely, and it could happen sooner than you think.
Image source: Getty Images.
1. Supply is still the biggest constraint
Nvidia has been reporting eye-popping revenue growth since the launch of ChatGPT. In fact, this was the first time in six quarters that the company failed to deliver triple-digit sales growth, though you’re not going to hear any complaints about a 94% jump on the top line.
Even as Nvidia’s growth naturally moderates, the amount of revenue it’s adding each quarter is still expanding, showing that the business is still accelerating. But what’s even more impressive is that its third-quarter revenue increase doesn’t reflect the underlying demand for its product. That continues to outstrip supply, which is constrained by Taiwan Semiconductor Manufacturing‘s ability to produce its chips.
On the third-quarter earnings call, chief financial officer Colette Kress described demand for the new Blackwell platform as “staggering” and demand for the legacy Hopper platform as “exceptional.”
Speaking about the Blackwell platform, she added, “We are racing to scale supply to meet the incredible demand customers are placing on us,” and she forecast that Blackwell demand would exceed supply for several quarters in fiscal 2026.
It’s impossible to quantify the company’s demand, but its quarterly revenue should be seen as a baseline for its potential revenue rather than an accurate reflection of demand for its products.
2. It has beaten back the bears
Wall Street is overwhelmingly bullish on Nvidia and has been for some time. Even as the company slipped on the earnings report, over a dozen analysts raised their price targets on the stock.
But there are bearish arguments against the stock. First, some investors believe that competition will eventually erode Nvidia’s advantage. However, AMD and Intel have already launched their competing AI accelerators, and so far, they do not seem like a threat to Nvidia.
AMD stock fell after its third-quarter earnings report due to disappointing guidance, and it said it would lay off 4% of its workforce. Intel, meanwhile, faces a wide range of challenges after announcing a massive restructuring in August.
Nvidia’s data center revenue run rate has now reached $120 billion, and with built-in competitive advantages like its CUDA software library, catching it may be impossible.
Another bearish view cites concerns about an “AI bubble” forming as Wall Street is anxious to see more revenue from Nvidia’s customers, including cloud hyperscalers.
But the chipmaker’s report should push back on that narrative as well because the company is experiencing demand from a wide range of companies, which are using AI for purposes well beyond large language models.
Asked about scaling limitations on large language models, CEO Jensen Huang responded that scaling up is continuing and is going beyond its conventional focus in training to post-training and inference.
While a risk of a bubble forming always exists in any high-growth asset class, Nvidia’s results indicate there’s no sign of a pullback so far, nor do there seem to be underlying structural concerns.
3. The stock is cheaper than it looks
After the third-quarter report, Nvidia now trades at a trailing price-to-earnings ratio (P/E) of 55, which is roughly double that of the S&P 500, but the business is growing so fast that trailing metrics don’t really tell the story.
It reported adjusted EPS of $0.81 in the third quarter, and extrapolating that over four quarters would give you a P/E of 44, which seems to be a more accurate reflection of its existing valuation.
Even forward estimates don’t seem to be the best indicator, since Nvidia regularly tops them. Currently, the consensus calls for earnings of $4.31 per share in fiscal 2026, which ends in January 2026. Based on that forecast, the stock has a forward P/E of just 34.
Over the last four quarters, however, Nvidia has beat consensus EPS by an average of 9%. If it continues that pattern, the company will deliver EPS of at least $4.70 next year, giving it a forward P/E of 31, nearly on par with the broad market.
Those ratios don’t even factor in the chipmaker’s soaring growth as its EPS is still doubling on a year-over-year basis.
$4 trillion is within sight
To reach a market cap of $4 trillion, the stock would only have to gain 14% from here, which seems very possible by the end of the year.
Nvidia just delivered another flawless round of results, and it remains the dominant force in the next major computing platform. The company will get to a $4 trillion market cap at some point. The only question is when.
