Nvidia's Demand Is Outpacing Its 70% Growth Forecast, and That Is Just the Beginning
I'm LongbridgeAI, I can summarize articles.Nvidia's demand for AI chips is accelerating, with customer forecasts suggesting sales could double in fiscal 2028, far exceeding the company's own 70% growth forecast. CFO Colette Kress attributed this to supply constraints rather than lack of demand, driven by the rise of agentic AI which significantly increases compute needs. Nvidia CEO Jensen Huang noted that most AI is now agentic, boosting GPU requirements. If supply constraints are overcome, Nvidia could double its sales, presenting strong long-term growth potential for investors despite current hardware limitations.
There may be no better company to represent the AI boom than Nvidia (NVDA +0.66%). Its graphics processing units (GPUs) are the backbone of artificial intelligence data centers, and in just three years, the company's market cap has skyrocketed by 445% to $5.5 trillion, making it the most valuable company in the world.
What continues to impress many investors is that Nvidia isn't done growing yet. In its fiscal 2027 second-quarter report, Management forecast that in fiscal 2028, its sales will rise by 70%, thanks to continued demand for AI chips.
But what's really interesting is that Nvidia leadership said it could double its sales in fiscal 2028 if it were able to overcome the constraints on the supply of commodities needed to produce its hardware.
In short, demand for Nvidia's chips is far outpacing the company's own forecast sales grown. Here's what's happening and why it's good news for Nvidia investors.
Image source: The Motley Fool.
Why GPU demand continues to accelerate
On Nvidia's second-quarter fiscal 2027 earnings call, Nvidia CFO Colette Kress said:
Incredibly, we are seeing demand acceleration even at our scale. Customer forecasts point to our growth doubling next year. However, as I mentioned earlier, we expect to grow approximately 70% as we are supply-constrained.
Kress is absolutely right. This level of sales growth is incredible for a $5.5 trillion company. To put it in perspective, Apple's market cap is just under $5 trillion, and its revenue growth was 16% in the third quarter to $109 billion. Still impressive for its size, but nowhere near Nvidia's growth.
There are a handful of reasons why demand for artificial intelligence processors remains high, the first of which is that agentic AI is replacing human-generated prompts as the main driver of workload growth. In short, AI is doing more tasks on its own, and that's driving computing needs much higher.
Nvidia CEO Jensen Huang said on the earnings call that "the amount of compute necessary is just extraordinary" because AI agents use between 15 and 100 times as much compute as would be required with a human guiding the work. All of this is combining to boost demand for Nvidia's GPUs.
Huang's not the only one projecting far more spending on AI infrastructure. S&P Global recently forecast that tech companies will spend an estimated $1.3 trillion on AI next year.
NASDAQ: NVDA
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Why this is good for Nvidia stock
Sometimes it can be a problem when a company can't meet its customers' demand. But in this case, it's not so much of a problem because the entire tech industry -- including nearly all hardware makers -- is struggling to keep up.
For example, Micron Technology's memory chips are having a significant problem, with demand far outpacing supply. That's led to skyrocketing memory prices, higher margins for Micron, and global supply constraints.
The big picture for Nvidia investors is that agentic AI could drive GPU demand much higher than it is now and will likely continue to boost Nvidia's sales for years to come. As Huang noted on the call:
Today, the vast majority of AI is prompted by people. I believe that this last month, it has crossed. Most AI are now agentic. But in the future, every company will have a whole bunch of agents.
Nvidia says it's working to increase supply to meet customer demand. If it succeeds, it could double its sales in fiscal 2028. But even if it doesn't, Nvidia appears to be on the cusp of another surge in processor demand that could last for years.