Could Nvidia Experience a Rise Following November 20th? Accumulating Information Suggests This Outcome.
The S&P 500 is surging towards a 25% boost this year, and numerous growth stocks have significantly contributed to this gain. However, the one that truly shines is Nvidia (-1.68%). It's earned its reputation as a stock market star due to its dominance in the artificial intelligence (AI) chip market, holding around 80% share. AI enthusiasts have been swarming to Nvidia for its AI chips and associated services, which has propelled earnings to skyrocket with triple-digit growth in each successive quarter.
Considering quarterly results, investor attention is currently drawn to an upcoming event scheduled in just a few days. Nvidia is set to reveal its fiscal 2025 third-quarter earnings on Nov. 20. While optimism is prevalent due to Nvidia's history of exceeding expectations and recent mentions of robust demand for its products, it's crucial to note that this particular quarter might signify a shift for the chip designer as it readies to launch its new Blackwell architecture.
So, is Nvidia poised to rise after Nov. 20? Evidence is accumulating, and it seems to be directing towards a specific outcome. Let's delve deeper.
Nvidia's Leading GPUs
First, let's analyze Nvidia's trajectory thus far. With top-notch graphics processing units (GPUs), the company has garnered a substantial customer base eager to obtain them. Customers are willing to pay a premium or wait for the latest iteration. Nvidia also offers a wide array of products and services, serving as a one-stop solution for all AI requirements. Moreover, the company's accessibility across all public clouds adds convenience for customers.
This strategy has allowed Nvidia to boast record revenue in recent quarters, largely thanks to its data center business. In the most recent period, data center accounted for 87% of the company's total revenue of $30 billion. Importantly, this level of revenue surpasses full-year revenue just two years ago. Moreover, Nvidia maintains a high profit margin, with gross margin exceeding 70%.
As mentioned, the upcoming report represents a minor shift for this tech dynamo. In the third quarter, Nvidia was readying for the production ramp-up of Blackwell – set to occur in the fourth quarter. Consequently, for the third quarter, Nvidia anticipates a double-digit increase year over year – a more modest growth compared to the triple-digit increases observed in prior quarters.
Some investors may view this reduced growth rate as a letdown or be apprehensive about potential challenges that may arise during the new product rollout. These factors could potentially impact Nvidia's stock following Nov. 20. However, additional evidence points to a positive stock performance post-earnings report. As mentioned, Nvidia has maintained a consistent track record of earnings growth and has exceeded expectations for at least the last four quarters.
Insights from Jensen Huang, Larry Ellison, and Elon Musk
Nvidia's CEO, Jensen Huang, has frequently touched upon the substantial demand for the new Blackwell platform in recent weeks. He even described the demand as "insane" during an interview with CNBC. Furthermore, feedback from clients backs up this claim. Oracle co-founder, Larry Ellison, and Tesla mogul, Elon Musk, have stated that they met with Huang and implored him for additional GPUs for their respective projects. Additionally, Taiwan Semiconductor Manufacturing – the company responsible for producing Nvidia's chips – reported double-digit revenue growth in its most recent quarter and mentioned high demand from its customers.
Consequently, it appears Nvidia may have some encouraging news to share on Nov. 20, which could propel the stock in the ensuing weeks.
However, it's essential to recognize that while positive news can lead to stock growth, sometimes stocks may still decline. Investors may argue that the shares have already appreciated significantly, and the good news might be priced in, for example. As a result, accurately predicting short-term stock performance is impossible.
What does all this imply for Nvidia and for you as an investor? As the data suggests, several reasons warrant optimism regarding the impending report, and it's conceivable that the stock will escalate following Nov. 20. Nonetheless, even if it fails to do so, that's fine. Nvidia stock still has ample potential for growth in the long term, thanks to the company's industry leadership, financial robustness, and ongoing innovation. And this makes it an excellent AI stock to invest in and hold for the long haul.
Considering the upcoming earnings report, investors might increase their stakes in Nvidia, anticipating robust earnings due to its history of exceeding expectations and strong demand for its products. Investing in Nvidia for the long term could yield substantial returns, given its industry leadership, financial robustness, and continuous innovation in the AI sector.
Regarding the upcoming third-quarter earnings report, investors are closely monitoring Nvidia's financial performance, particularly its revenue from the data center business, which currently accounts for over 87% of the company's total revenue. The upcoming report might provide insights into the performance of Blackwell, the company's new architecture, which is set to launch in the fourth quarter. Investors should consider these factors while deciding whether to invest in or hold onto Nvidia stocks.
