TLDR
- Nvidia shares up 0.3% premarket at $144.61 following Tuesday’s 0.4% decline
- UBS analysis shows current Blackwell hardware generates $24 billion per gigawatt versus CEO’s $40-50 billion target
- Global data center capacity of 10GW set to begin construction this year per JLL estimates
- Stock’s forward P/E ratio climbing but still below 2024 peak levels in mid-40s range
- European AI infrastructure buildout accelerating with multiple facilities under development
Nvidia stock moved higher in Wednesday’s premarket session as Wall Street digests the chipmaker’s massive data center opportunity against current hardware economics. Shares climbed 0.3% to $144.61 after declining the previous day.
The stock has traded sideways since rocketing from sub-$100 levels in April. With a $3.52 trillion market cap, investors want more evidence to justify pushing valuations higher.
Jensen Huang’s bold revenue claims are getting scrutiny. The CEO projects $40-50 billion in annual revenue per gigawatt of AI data center capacity across the industry.
Real estate analysts at JLL report 10 gigawatts of new data center capacity will start construction globally this year. Simple math suggests hundreds of billions in potential annual revenue for Nvidia.
But the timeline for reaching those numbers remains murky. Current hardware pricing tells a different story about near-term revenue potential.
Timothy Arcuri from UBS crunched the numbers on existing Blackwell chip pricing. His analysis shows Nvidia can realistically capture around $24 billion per gigawatt today.
Hardware Evolution Required
The revenue gap points to future chip generations driving higher per-gigawatt economics. Arcuri expects the $40-50 billion figure applies to upcoming Rubin Ultra NVL576 processors arriving in 2027-2028.
First quarter results demonstrate the underlying business strength. Revenue surged 69% year-over-year to $44 billion despite restrictions on China sales.
Management still forecasts 50% revenue growth for the current quarter. That’s impressive growth even without access to Chinese customers who previously bought specialized H20 chips.
Europe is finally joining the AI infrastructure race. Nvidia has confirmed multiple AI processing facilities are under construction across European markets.
This geographic expansion could provide another growth catalyst. Europe has lagged behind the US and China in AI data center investments until recently.
Industry forecasts support the long-term bullish case. Data center construction spending hit $400 billion worldwide in 2024 according to projections Nvidia highlighted at its GTC conference.
Valuation Dynamics
The same analysis forecasts construction spending reaching $1 trillion by 2028. That represents a 150% increase over four years if accurate.
Nvidia captured $115 billion in data center GPU revenue during fiscal 2025. Maintaining market share as spending doubles would drive substantial stock appreciation.
Current valuation metrics echo patterns from 2024’s first half. Back then, investors questioned whether analyst earnings estimates were too optimistic.
Skepticism kept the forward price-to-earnings multiple relatively compressed during early 2024. Once results validated the growth trajectory, the stock soared and P/E ratios expanded to the mid-40s.
Today’s forward P/E is rising gradually but hasn’t reached those elevated levels yet. This suggests potential upside if growth continues meeting expectations.
Semiconductor peers also gained ground Wednesday morning. AMD shares jumped 1.9% while Broadcom added 0.4% in premarket trading.
Nvidia’s GPU architecture maintains clear advantages for AI workloads. The parallel processing design excels at machine learning tasks compared to traditional CPU architectures.
Chinese export restrictions have created some revenue headwinds. However, demand from other regions appears robust enough to sustain rapid growth rates.
European data center development represents a fresh revenue stream. Multiple GPU-powered AI facilities are moving from planning to construction phases.
The company’s data center business generated $115 billion in fiscal 2025 revenue. This figure could multiply if construction spending projections prove accurate and Nvidia retains its dominant market position.
Current forward P/E levels remain well below the mid-40s range achieved in 2024 when growth skeptics became believers. Similar valuation expansion could drive significant stock gains if the growth story continues executing.
