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Investors in Nvidia stock got some great news from Elon Musk today. The company founded by Elon Musk will spend billions of dollars on Nvidia chips. However, Nvidia's share price fell nearly 4% today amid a general stock market slowdown. The news is certainly positive for Nvidia, but the share price is not reacting as optimistically as broader market forces are trumping the news regarding the company today.
So, I'll share with you the details of this news and explain why it's great for Nvidia kkev for the top 10 deals to buy now. OK. Elon Musk's artificial intelligence company xAI is raising up to $6 billion at a valuation of $50 billion. The financing, which is set to close early next week, consists of $5 billion from Middle Eastern sovereign wealth funds and $1 billion from other investors, according to CNBC's David Faber.
Here's the part that's great for Nvidia investors. These funds will likely be used to purchase 100,000 Nvidia chips. 100,000 Nvidia chips. So the company will benefit from another client, one of its largest customers, receiving several billion dollars in funding , which it will likely spend on Nvidia chips.
Now, as I said, surprisingly, the stock price is still down today, even with this news. Nvidia shares fell by almost 4% to 3.7%. on the day of this announcement, as of the time of recording. But that doesn't detract from how good this news is for Nvidia. 100,000 chips, or about $5 billion in additional revenue for Nvidia, is a significant amount.
In the most recent quarter, Nvidia generated $30 billion in revenue. So, if the company gets an additional $5 billion in revenue from xAI, it will be a significant portion of its quarterly revenue . It remains to be seen whether they will be spent in one quarter on one large purchase, or whether these purchases will be spread over time.
This remains to be seen. But you've probably heard the news that Nvidia's Blackwell chip tech, Grace Blackwell, is sold out for at least a year . So if Elon Musk's company wants to secure these chips, it may have to make one bulk purchase or negotiate other terms, as Nvidia has the upper hand in negotiations.
Now, it is the companies that want to get Nvidia chips that must offer certain conditions so that Nvidia allocates the chips to them , and not to someone else. The queue to buy Nvidia chips is very long, so Nvidia sets high prices and favorable terms for itself , such as a large deposit or ordering in advance, or ordering the entire batch at once instead of dividing it into parts to reduce risks.
All these conditions are in favor of Nvidia. Nvidia will report third- quarter results on November 20, and the company said it expects revenue for the quarter to be $33 billion . Of course, this doesn't take into account the news that XAI is raising another $5 billion and possibly acquiring more. This will not be included in the company's third quarter 2025 results.
If this is taken into account, then in the results for the fourth quarter and beyond, perhaps even in the first, second, or third quarter of 2026 . So this won't impact the company's revenue in the near term, but it's a potential revenue boost of several billion dollars in the coming quarters. This is another company that joins the ranks of players like OpenAI that are spending billions of dollars on Nvidia chips.
So this is another customer buying chips, a customer that is getting bigger and growing faster. And the better XAI grows, the better for Nvidia, because that company's valuation depends on access to Nvidia chips and the large language model it can develop on them. Without Nvidia chips, XAI would not be able to grow as quickly and would not be able to improve the efficiency of its model as quickly.
Therefore, it is strategically important for XAI to have access to Nvidia chips. Does this change my valuation of Nvidia stock? I recently conducted a discounted cash flow (DCF) analysis for Nvidia stock, where I concluded that the intrinsic value of the stock is $314. So, answering the question, does this news change my valuation of Nvidia stock?
The answer is—not yet . It's still too early to factor this news into my assessment. I need to know more about this. How much will the company actually raise? Remember, we were talking about an amount of up to $5 billion. Maybe it will be less. And the funding may not arrive until next week. And then—the purchase of 100,000 Nvidia chips.
When will this happen? Will they happen at all? I want to hear more certainty and more precise timing and dates regarding these purchases , and then I can incorporate that into my assessment; this will likely be factored in as a change in growth rates over the next few years as an additional multi-billion dollar buyer emerges.
This will likely increase the already high growth rate over the coming years . Nvidia's expected short-term earnings per share growth rate is over 57%, as you can see here. So now you have another multi- billion dollar customer that could provide additional growth to this short-term indicator or at least stabilize it at 57%.
If you look at Nvidia's forward price/earnings ratio, it has not increased on the back of this news. The stock is trading at a forward price/ earnings multiple of 34, which, as I mentioned, is an undervalued indicator. I think we'll hear a lot more about this when Nvidia reports its earnings on November 20th, which is just 5 days away and less than three trading days away.
Therefore, I don't think investors in Nvidia stock should take any action on this news right now. I believe that during the earnings call, where Nvidia's CEO will definitely be asked questions about future demand and sales forecasts for the 2025 and 2026 calendar years, we will learn more about the outlook, after which we will be able to make decisions based on this more tangible evidence of demand and supply dynamics.
So this is great news, no doubt. Great news for investors in Nvidia stock. This is something to remember. And when the company reports earnings on November 20, we'll see how that affects the earnings conversation. We'll see if Nvidia points to any new customers that become a bigger part of the company's strategic focus going forward.
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