Nvidia (NASDAQ: NVDA) Share prices have been unstoppable in recent years, thanks to the company’s key role in the world of artificial intelligence (AI). The tech giant makes graphics processing units (GPUs) that power crucial AI tasks such as training and deriving large language models. These models then move on to complete complex tasks. Nvidia has 80% of the AI ​​chip market because its GPUs are the fastest out there, and that translates into explosive profit performance.
The company’s quarterly profits have exceeded analyst expectations for at least the past four quarters. And revenue and net income have grown by triple and even quadruple digits in recent quarters – well into the billions of dollars. So it’s no surprise that shares are up more than 200% in the past year.
Given all this, should you rush to buy Nvidia stock ahead of the May 22 earnings report?
Nvidia’s transition from gaming to AI
First, here’s a look at Nvidia’s earnings path to date. A few years ago, the company generated most of its revenue from the video game industry, with the GPU bringing games to life on the screen. But the GPU’s ability to handle multiple tasks simultaneously made it clear that this chip could be a big win in other sectors as well. Nvidia created CUDA, a parallel computing platform that brings the GPU to general computing – and opened the door to AI.
Since then, Nvidia has gradually grown revenue from its data center business – which includes its AI offering – and it now represents the company’s largest source of growth and revenue. In the most recent quarter, data center revenues rose more than 400% year over year to a record $18.4 billion. That’s a total revenue of about $22 billion (also a record) and significantly more than the gaming revenue of $2.9 billion.
In addition to GPUs, Nvidia offers a wide range of products and services, including a growing cloud software platform that streamlines the development of a company’s AI applications. Potential customers can access all of this through the world’s largest cloud providers – so it’s easy for a business to learn what Nvidia has to offer and get started.
Nvidia vs the competition
It’s true that Nvidia is facing increasing competition from rivals such as Intel And Advanced micro devices, both of which have recently announced new, high-performing chips. Intel even said its latest innovation – the Gaudi 3 AI accelerator – beat Nvidia’s H100 in performance and price.
Partners are also challenging Nvidia. For example, Amazon‘s Amazon Web Services (AWS), sells Nvidia products And its own, internally developed training and inference chips.
These players will likely gain some market share, but Nvidia still has what it takes to dominate the market and keep those looking for a premium chip coming back. This is due to the company’s first-to-market advantage, along with its reputation for top performance and continuous innovation.
Later this year, the company plans to release its Blackwell architecture, which will include six new technologies – and it will include the most powerful chip yet. Even if the competition intensifies, it’s not likely to dethrone Nvidia.
Now let’s take a look at what we can expect from the company’s earnings report next week. Nvidia previously forecast first-quarter 2025 revenue of about $24 billion, which represents an increase of more than 200% year-over-year. The GAAP gross margin forecast of 76.3% also shows a big jump from the prior period, when GAAP gross margin was 64.6%.
One factor that could create headwinds is the U.S. government’s restriction on sales of AI chips to China. Nvidia has designed a new chip that meets government specifications, but it is not yet clear whether such a product will take off.
Is Nvidia a buy?
Let’s get back to our question: Should you buy Nvidia before the May 22 earnings report? Not necessary.
As a long-term investor, you won’t gain or lose much if Nvidia stock makes even a double-digit move after the report. These kinds of moves won’t stand out in the performance of Nvidia stock over a five- or 10-year period — your minimum holding period. This is great as it takes the pressure off ahead of events such as earnings reports and means you don’t have to rush into an investment decision.
That said, I’m optimistic about Nvidia’s future, thanks to its solid market position, focus on innovation, and the fact that the overall AI story is still in its infancy. It’s a great idea to buy Nvidia – before or after May 22nd.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Adria Cimino has positions in Amazon. The Motley Fool holds positions in and recommends Advanced Micro Devices, Amazon, and Nvidia. The Motley Fool recommends Intel and recommends the following options: long January 2025 $45 relying on Intel and short May 2024 $47 relying on Intel. The Motley Fool has a disclosure policy.
Should You Buy Nvidia Stock Before May 22? was originally published by The Motley Fool
