The S&P500 is trending toward a 25% gain this year, and many growth stocks have been major contributors to these gains. The one that stands out though is Nvidia(NASDAQ: NVDA). It has become a stock market star thanks to its leadership in the artificial intelligence (AI) chip market, with a share of around 80%. AI customers are flocking to Nvidia for its AI chips and related products and services, and this has helped drive triple-digit profit growth quarter after quarter.
And speaking of quarterly results, investors are now focusing on a specific event that will occur in a few days. Nvidia plans to release third-quarter fiscal 2025 results on November 20. We can be optimistic considering the company has exceeded expectations and recently talked about “insane” demand for its products. Yet Nvidia is already up almost 200% this year. And it’s important to remember that this particular quarter could mark a transition for the chip designer as it prepares to launch its new Blackwell architecture.
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Now the question is: will Nvidia take off after November 20? The evidence is piling up and pointing to one particular outcome. Let’s find out more.
Image source: Getty Images.
So let’s first look at Nvidia’s story so far. The company’s graphics processing units (GPUs) are considered the best around, which explains why customers are rushing to get their hands on one — and don’t mind paying a higher price or waiting until they get their hands on the latest version. Nvidia also sells a wide range of products and services, so customers can turn to the company for all their AI needs. Even better, Nvidia has a presence in all public clouds, making it easy and convenient to access these offerings.
All this has contributed to Nvidia achieving record revenue in recent quarters, driven by its data center business. In the most recent period, data centers accounted for 87% of the company’s total revenue ($30 billion). And that turnover level only just exceeds the turnover for the entire year as two years ago. Importantly, Nvidia is highly profitable on its revenue, with a gross margin of over 70%.
As mentioned, the upcoming report represents a small transition for this tech giant. In the third quarter, Nvidia prepared for the Blackwell production disaster, which would occur in the fourth quarter. And the company has seen revenue grow so strongly in recent years that it forecasts double-digit year-over-year increases for the third quarter – rather than the triple-digit increases we’ve seen in recent quarters.
Some investors may see a lower growth rate as a disappointment or worry about potential headwinds that could arise during the introduction of a new product. These elements could have a negative impact on Nvidia stock after November 20. But more evidence points to positive stock performance after the earnings report. As mentioned, Nvidia has posted a solid track record of earnings growth, beating expectations at least over the past four quarters.
Nvidia CEO Jensen Huang has repeatedly spoken in recent weeks about the high demand for the new Blackwell platform. He even called the demand “insane” during an interview with CNBC. Customer comments support this idea. Oracle co-founder Larry Ellison says he and Tesla chef Elon Musk met with Huang and “begged” him for more GPUs for their projects. Finally, Taiwanese semiconductor manufacturingthe company that produces Nvidia’s chips reported double-digit revenue growth for this latest quarter and spoke of high demand from its customers.
All of this suggests that Nvidia has a lot of positive news to report on November 20, and that could help its shares rise in the coming weeks.
That said, it’s important to remember that even on positive news, stocks sometimes fall. Investors may feel that the shares have already gained quite a bit and that the good news, for example, has been priced in. So it is impossible to predict short-term stock performance with 100% accuracy.
What does all this mean for Nvidia and for you as an investor? As you can see here, there are plenty of reasons to be optimistic about the upcoming report, and it’s possible that stocks will rise after November 20. But even if that’s not the case, that’s no problem. Nvidia stock still has plenty of room to move forward over time, thanks to the company’s market leadership, financial strength, and continued innovation. And that makes it a fantastic AI stock to buy and hold for the long term.
Consider the following before buying shares in Nvidia:
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Adria Cimino has positions in Oracle and Tesla. The Motley Fool holds positions in and recommends Nvidia, Oracle, Taiwan Semiconductor Manufacturing, and Tesla. The Motley Fool has a disclosure policy.
Will Nvidia rise after November 20? The evidence is piling up and it says this. was originally published by The Motley Fool
