NVIDIA: Still a market darling in 2024?

Nvidia stock was one of the best performers of the first half, climbing almost 150%.

Nvidia (NVDA -5.45%) stock has been on fire for the past few years for a very good reason: The company's dominance in the artificial intelligence (AI) chip market. Nvidia holds an 80% share, and due to its commitment to innovation, this leadership could continue. All of this has translated into triple-digit earnings growth and investor optimism about the company's future.

And that helped Nvidia continue its path higher this year, soaring nearly 150% in the first half. The stock has taken a bit of a pause in recent weeks following its stock split, but I don't think this lackluster performance will last for long. In fact, my prediction is Nvidia stock will climb in the second half thanks to one game-changing move the company is about to make.

Nvidia's biggest business

First, a quick recap of Nvidia's path so far. The tech giant sells the world's top-performing graphics processing units (GPUs), chips that drive the most essential AI tasks, and an entire ecosystem of products and services for customers developing AI projects. Nvidia's GPUs originally were most known for powering video games -- and the company still generates revenue here -- but today AI has become the company's biggest business.

In the recent quarter, data center revenue surged to a record of more than $22 billion -- that's on a total of $26 billion in revenue. Nvidia also is highly profitable, generating more than $14 billion in net income and growing gross margin to about 78% from 64% in the year-earlier period.

All of this has helped the stock advance not only this year but in recent years. Over the past five years, Nvidia has soared 2,900%, and the stock roared past $1,000 back in May. The company recently completed a 10-for-1 stock split, bringing down its shares to less than $130. Though this doesn't change anything fundamental about the company such as its market value or valuation, the move does make it easier for a broader range of investors to get in on the stock.

After Nvidia's mind-blowing performance though, some investors worry the stock might lose its momentum. But here's the one game-changing move that could send this innovative player higher in the second half. I'm talking about Nvidia's upcoming launch of its Blackwell architecture and its best-performing chip yet. Demand for Blackwell already has surpassed supply, and the company expects this to continue into next year. The system is in production right now, with Nvidia aiming to make it globally available later this year.

Today's Change

(-5.45%) -$6.88

Current Price

$119.48

Key Data Points

Market Cap

$3,108B

Day's Range

$118.12 - $121.85

52wk Range

$39.23 - $140.76

Volume

122,377,662

Avg Vol

402,184,108

Gross Margin

75.29%

Dividend Yield

0.02%

The Blackwell rollout strategy

The company predicts "fast and broad adoption" across its range of customers and their projects thanks to its rollout strategy. More than 100 original equipment manufacturer and original design manufacturer systems will include Blackwell at the launch -- and every major computer maker will be part of this.

Why is Blackwell such a big deal? Because the architecture delivers 4 times faster training and 30 times faster inference than Nvidia's current top performer, the H100. And when customers save on time, they not only make their AI projects operational faster, but they also save on costs. In fact, Nvidia says Blackwell results in a 25 times lower total cost of ownership for a customer compared to its current Hopper architecture. So, Blackwell should be a major step forward for Nvidia and its customers.

My prediction for gains

Now let's talk a little more about my prediction. Since Nvidia plans to release Blackwell later this year, I would expect to see the impact on revenue growth next year -- but I still think this launch could act as a positive catalyst for stock performance in the months to come, especially if Nvidia continues to report high demand in upcoming quarters. As investors anticipate earnings growth ahead, they may choose to get in on this stock now -- and potentially benefit as Blackwell revenue starts rolling in.

I wouldn't expect Nvidia shares to replicate their triple-digit first-half performance, but considering the company's earnings growth over the past several quarters and the idea that Blackwell could serve as a significant new growth driver, I wouldn't be surprised to see Nvidia stock climb in the double digits in the second half. After all, analysts forecast average annual earnings-per-share growth of more than 46% over the coming five years.

Finally, here's the best news of all: Even if I'm wrong and Nvidia stock falters in the second half, the company, thanks to its solid market position and innovation, has what it takes to benefit from AI growth over time -- and this could lead the stock significantly higher in the years to come.

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