In recent weeks, investors have been eagerly awaiting the release of several companies’ third-quarter earnings results. Factors like the election and buzzworthy topics in artificial intelligence (AI) have added an extra layer of ambiguity to this particular earnings season.
For the most part, the major tech reports have been pretty solid. But the “Magnificent Seven” member everyone is most curious about has yet to report: Nvidia(NASDAQ: NVDA). That will change on November 20.
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This particular earnings report could be more meaningful than the usual one. Here’s what investors should pay attention to, and my thoughts on whether they should pick up stocks before the long-awaited data drop.
Over the past two years, Wall Street analysts and investors who follow Nvidia have focused on growth trends in its computing and networking businesses. In particular, sales related to the company’s data center services and graphics processing units (GPUs) seem to be all anyone wants to talk about.
The upcoming earnings report will be no different. When CEO Jensen Huang and CFO Colette Kress address investors on the earnings call, I can all but guarantee that the executives will be peppered with questions about one specific thing: the upcoming launch of the Blackwell chip line, Nvidia’s most powerful GPUs yet.
While early reports have suggested that Blackwell could generate $10 billion in revenue by the end of the year, there’s a more granular detail that I’d encourage investors to pay attention to.
One of Nvidia’s closest partners is an IT infrastructure company Super microcomputer. Supermicro specializes in providing storage cluster architectures that house GPUs, such as those from Nvidia. However, in recent months, Supermicro has been at the center of a drama. The company postponed the submission of its annual report and was withdrawn by the accountant last week.
In response, Nvidia will reportedly shift some of its supply chain efforts away from Supermicro in favor of other IT architecture specialists. While this seems like a logical step, I’m curious to see if this transition will impact Nvidia’s financial guidance regarding Blackwell in any way.
Image source: Getty Images.
The chart below shows Nvidia’s stock price over the past two years, with annotations showing when the quarterly reports arrived.
NVDA graph
Around the time the earnings reports come out, investors may see that Nvidia’s stock price tends to experience a bit more volatility and momentum. In my view, Nvidia’s commentary surrounding Supermicro and Blackwell could impact the stock price quite dramatically one way or another.
The bigger idea at play here is that Nvidia stock has risen significantly in recent years, and the stock price has proven quite resilient even after some short-lived sell-offs.
While Nvidia’s multibagger returns over the past few years certainly make the stock tempting, investors should keep in mind that competition in the GPU space is increasing. While this won’t be too damaging to Nvidia, new chips from other suppliers could put a dent in the company’s growth over time.
Ultimately, I think investors should listen carefully to any comments from Nvidia’s leadership regarding Blackwell that might help them discern how these new GPUs will fare in the face of increasing competition. To me, buying Nvidia ahead of its upcoming earnings report carries too much risk – a move more suited to a short-term trader than a long-term investor.
For that reason, I would stay on the sidelines with Nvidia for now and encourage investors to continue gathering as much information as possible before following the crowd.
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Adam Spatacco has positions at Nvidia. The Motley Fool holds positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
Should You Buy Nvidia Stock Before November 20? Here’s what history suggests, originally published by The Motley Fool
