Prepare for Swift Purchase of Nvidia Shares: Two Straightforward Motivations to Act Before November 20th
Nvidia's (NVDA -2.09%) AI-driven surge in 2024 continues unabated, with cloud service providers, governments, and tech enthusiasts alike eager to acquire the company's GPUs for AI model training and deployment. This year, shares of the semiconductor titan have soared by 173%. Given the recent developments in the AI landscape, it's plausible that the stock's upward trend will persist, with the company's Q3 fiscal 2025 earnings set to act as a catalyst. The chipmaker is slated to disclose its Q3 earnings (covering the October 27-November 20 period) on November 20.
Let's delve into why investing in this skyrocketing AI stock could be a smart move ahead of its earnings report.
Nvidia outperforms competitors
In the AI chip market, Nvidia competes with Advanced Micro Devices (AMD) and Intel. Yet, AMD's Q3 2024 results suggest a considerable distance between the two. AMD's data center revenue streaming in at $3.5 billion in Q3 2024 represented a 122% year-over-year increase. However, Nvidia's data center revenue in the second quarter of fiscal 2025, ending in July, surpassed it substantially, standing at $26.3 billion.
More notably, Nvidia's data center revenue expanded by 154% year-over-year in the preceding quarter, despite its sizeable market presence. Moreover, AMD sells both server GPUs and CPUs, but it has struggled to gain traction in the AI chip market compared to Nvidia's achievements.
In the meantime, Intel falls behind. Originally planning to sell $500 million worth of AI GPUs this year, Intel's management acknowledged on its latest earnings call that "Gaudi's overall uptake has lagged behind our expectations." As a result, Intel won't hit its $500 million revenue target in 2024, posing little threat to Nvidia.
On the other hand, AMD anticipates AI GPU sales of $5 billion in 2024. Although impressive, these figures still lag significantly behind the value of AI GPUs Nvidia sells in a single quarter, affirming Nvidia's continued supremacy in the AI chip market. With its current revenue growth trajectory, Nvidia could end the year with a staggering $84 billion in AI GPU revenue.
If we add up the potential AI GPU revenue forecasts of Nvidia, AMD, and Intel, it becomes clear that Nvidia commands over 90% of this market currently. Moreover, its competitors have failed to make substantial inroads in the AI chip market even after two years. Consequently, Nvidia retains a powerful position to capture most of the AI GPU spending.
According to AMD's projections, the data center AI accelerator market is set to generate $500 billion in annual revenue by 2028. Nvidia's robust market share ensures it will seize the most significant share of this expanding market.
Tech giants plan to allocate more funds to AI infrastructure
Another salient theme emerging from recent earnings reports of tech giants like Meta Platforms (META) and Microsoft (MSFT) is their commitment to investing heavily in AI infrastructure.
Meta Platforms, for instance, has raised the lower end of its capex forecast for 2024 to between $38 billion and $40 billion. Although the company plans for an increase in capex investment next year, it expects a "significant acceleration in infrastructure expenditure growth" beyond 2024.
Meta CEO Mark Zuckerberg emphasized that the company's AI initiatives required stronger investment to maximize the technology's potential. During the recent earnings call, Zuckerberg mentioned:
First, it's clear that new AI advances offer numerous opportunities to boost our core business with high returns over the next few years. As such, we should invest more in those advances.
And second, our AI investments require substantial infrastructure support, and we plan to continue investing significantly in this area as well.
Microsoft, too, is dedicating significant funds to AI infrastructure. In the first quarter of fiscal 2025, its capex stood at $20 billion, representing a notable increase compared to the $11.2 billion it spent in the same quarter the previous year. As Microsoft's fiscal 2024 capex came in at $55.7 billion, its first-quarter FY25 outlay hints at a substantial acceleration in its spending on AI infrastructure.
Indeed, Microsoft's management team expects capex to "increase further given our cloud and AI demand signals." These developments underscore the resilient demand for AI hardware and highlight how Nvidia will likely maintain its impressive growth trajectory.
Consensus estimates compiled by Yahoo! Finance forecast Nvidia to report $32.9 billion in fiscal Q3 revenue when it releases its earnings report soon. The company's earnings are projected to double year-over-year to $0.74 per share. The chipmaker previously projected $32.5 billion in revenue at the midpoint when it released its augmented guidance in August. This suggests that analysts anticipate stronger growth from the company.
The persistent need for advanced AI hardware, coupled with the expansion endeavors of Nvidia's production partner in the manufacturing sector, hints at potential exceeding of forecasted figures. Such a scenario could provide this soaring AI company with a much-needed boost. considering that Nvidia is currently trading at a reasonable 35 times its projected earnings, as opposed to the U.S. tech sector's typical 45 times, investors have an additional compelling motivation to invest in this stock before it unveils its quarterly results on November 20th.
Given the strong interest in AI from cloud service providers, governments, and tech enthusiasts, investing in Nvidia's stock could be a smart move, considering its impressive Q3 2024 earnings forecast and the potential for continued growth in the AI landscape. Furthermore, prominent tech companies like Meta Platforms and Microsoft are increasing their investments in AI infrastructure, which could further drive demand for Nvidia's AI-focused products.
