Nvidia (NVDA) stock opened the year at around $50 per share (on a split-adjusted basis). By the end of November 2024, the AI hardware giant’s price had surpassed $145 – that growth amounts to a market value increase of almost 195% this year.
When one of the largest companies in the world nearly triples in value in 11 months, investors take notice. You naturally wonder whether Nvidia will continue to grow and, if so, whether you can benefit from it.
To help you decide whether you should invest in Nvidia, we look at the key factors from the company’s latest earnings release and the questions you should consider before placing a purchase order.
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Nvidia reported third-quarter revenue of $35.1 billion and $0.81 in non-GAAP diluted earnings per share (EPS). Revenue was up 94% from the previous year’s quarter, and earnings per share were up 103% year over year.
More information: Follow Nvidia’s share price here
Notably, Nvidia generated nearly 88% of its revenue from its data center reporting segment, which also includes the company’s AI computing solutions. Data center revenue grew 112% year over year, outpacing the company’s other three segments. Nvidia’s gaming revenues rose 15%, professional visualization revenues rose 17%, and automotive and robotics revenues rose 72%.
Nvidia reported triple-digit data center revenue growth for the first time in the second quarter of fiscal 2024. Now that the company has surpassed these gains, comparisons will become more challenging in the future. Still, Nvidia’s leadership team expects more growth.
The company’s fourth-quarter revenue guidance is $37.5 billion, plus or minus 2%. This compares to revenue of $22.1 billion in the fourth quarter of fiscal 2024. Non-GAAP gross margin guidance for the coming quarter is 73.5%, plus or minus 50 basis points. Nvidia has kept its non-GAAP gross margin above 70% throughout this recent phase of growth, since the second quarter of fiscal 2024.
Latest news: Nvidia earnings forecast high expectations as ‘the age of AI is in full force’
Nvidia plans to ship its most powerful graphics processing units (GPUs) yet later this year. The launch is one for investors to watch. According to Nvidia, the next-generation Blackwell chips will deliver more computing power with lower power consumption than the company’s industry-leading H100 chip.
Nvidia recently reported positive test results for the Blackwell platform. Compared to MLPerf Training 4.1 industry benchmarks, Blackwell delivered up to 2.2x more performance per GPU. MLPerf benchmarks were developed by a consortium of AI leaders from multiple disciplines to evaluate workloads for machine learning workflows.
If Blackwell chips live up to expectations, it could spark a new wave of strong demand for AI hardware.
Video: Nvidia’s Blackwell and what it means for AI chip demand in 2025
Nvidia has business momentum, but that alone doesn’t justify an investment decision. An ownership position in the chip designer only makes sense if it aligns with your risk tolerance, investment goals and interests. Before purchasing, test this alignment using the eight questions below.
No. 1: Can I handle big swings in Nvidia’s price?
Nvidia lost 50% of its value by 2022. The company also fell nearly 83% in 2002 after the dot-com bubble burst.
The stock eventually recovered from both declines, but Nvidia remains a high-volatility position. The potential for big changes in value, up or down, should influence how much Nvidia stock you might want to own.
Diversifying your investments outside of Nvidia offers some protection against future volatility. Consider setting a limit on your relative Nvidia exposure based on your risk tolerance. For example, a conservative approach would limit the value of your Nvidia stock to 1% of your portfolio. At this allocation, Nvidia could drop dramatically and your net worth would remain largely intact.
Nvidia pays dividends, but it’s not a good dividend stock. The 0.03% dividend yield compares poorly with the yield on savings accounts and many other S&P 500 stocks. For comparison, the average interest rate on cash deposits in the US is 0.43% and the average dividend yield of the S&P 500 is 1.24% as of November 19.
If income is your primary investment goal, there are better options than Nvidia.
More information: How to Start Investing: A Step-by-Step Guide
No. 4: Is Nvidia’s current price acceptable considering its sales and revenues?
Nvidia’s stock price is high relative to historical sales and profits. Investors who buy Nvidia today are largely convinced that the company’s future earnings will justify its current price tag.
This is common reasoning for growth stocks, but there are risks involved. Stocks that trade at high prices relative to earnings can be volatile. The stock price moves higher on investor optimism, but could fall quickly if earnings don’t meet future expectations.
If you prefer a safer approach, you can wait for Nvidia’s price to drop before buying. As long as the decline is related to investor sentiment or a temporary circumstance, it should not impact the company’s long-term potential.
No. 5: Do I understand and agree with AI’s value proposition?
The optimistic outlook for Nvidia hinges on continued spending on AI infrastructure. Several researchers and analysts believe that the expansion of AI technology still has years of growth ahead of it. However, research and consulting firm Forrester notes that “only 20% of companies reported profit benefits from AI in 2024,” despite billions spent on AI infrastructure in 2023.
AI implementations must deliver returns or the trajectory of data center infrastructure spending will change. A drop in spending could test Nvidia’s efforts to meet investor expectations.
The Commerce Department has proposed new rules limiting the export of high-performance semiconductors and related technologies. The rules are intended to prevent foreign adversaries from developing technology that could threaten national security.
Meanwhile, the US maintains its existing export restrictions. In November 2024, the Ministry of Commerce ordered Taiwan Semiconductor (TSM), a key supplier to Nvidia, to stop shipping high-performance chips to Chinese customers.
Existing and new semiconductor export restrictions limit Nvidia’s opportunities in China, a significant market. Statista estimates that Chinese chip sales will reach $185 billion by 2023.
If you plan to invest in Nvidia, plan to monitor these regulatory developments and evaluate their ongoing impact on the company.
No. 7: Do I understand who Nvidia’s competition is?
Advanced Micro Devices (AMD), a competitor of Nvidia, is also targeting the AI chip market. In recent years, AMD CEO Lisa Su has dramatically increased the company’s R&D budget and made a series of acquisitions to broaden AMD’s AI resources and expertise.
AMD doesn’t currently have a meaningful market share in AI chips, but the company says its latest chip, the MI325X, is more powerful than Nvidia’s H200. As a potential Nvidia investor, you might consider analyzing a competitor like AMD to understand its capabilities and how they could impact Nvidia’s prospects.
Nvidia also faces competition from the major cloud computing providers: Microsoft (MSFT), Alphabet (GOOG) and Amazon (AMZN). These tech giants, currently among Nvidia’s largest customers, are developing their own AI chips to avoid being too dependent on Nvidia.
It’s always smart to define your selling parameters before buying stocks, especially the volatile ones. Selling triggers can be positive developments that push the stock price higher and create profit opportunities. Or triggers can be negative conditions that permanently dampen the company’s prospects.
Having documented sales triggers can keep you from making an emotionally driven liquidation decision. With Nvidia’s history of price declines and recoveries, a hasty decision to sell could leave you watching from the sidelines as the stock starts growing again.
Only you can decide whether the risks associated with Nvidia stock are worth the rewards. Get to know the company, know your risk tolerance, and choose a position size that makes sense. Keep in mind that you can always expand your Nvidia holdings once you feel comfortable with its behavior.
