Should You Buy Nvidia Stock Before Nov. 20?

Nvidia's stock is continuing to surprise many, but is its rapid growth nearing an end?

The rise of artificial intelligence (AI) is showing no signs of slowing down, but some investors are starting to worry about potential downturns. Last week, a thriving U.S. economy and strong earnings from several AI-focused companies helped the Nasdaq Composite hit new record highs. However, these same positive indicators have led some to question if the current bull market has advanced too quickly.

Nvidia (NVDA) has emerged as a leading player in the generative AI field, and the upcoming fiscal 2025 third-quarter results, due in less than three weeks, are highly anticipated on Wall Street. Investors are eager to gather insights on the state of AI adoption from this financial report. Since the beginning of last year, Nvidia's sales have skyrocketed, contributing to an incredible stock increase of 833% (as of now), with the stock being just below its all-time high from late last month.

With so much dependent on Nvidia's next financial report, shareholders are left wondering if the stock can maintain its fantastic growth. Is it a good idea to buy shares before the Nov. 20 earnings announcement? Fortunately, new data could provide clues to help investors make this decision.

The Bright Side of Nvidia's Growth

Nvidia's exceptional performance in recent years is largely attributed to the success of its graphics processing units (GPUs). These chips are adept at providing the computational power needed for generative AI and related cloud computing tasks. The immense resources and data requirements associated with elite AI models mean that only the largest tech companies and cloud providers can support them—most of which are Nvidia's customers. Observations from these companies during their recent earnings calls shed light on the current state of the AI landscape.

For instance, Microsoft reported substantial investments to further its AI initiatives in its fiscal 2025 first quarter that concluded on Sept. 30. The company had capital expenditures (capex) of $20 billion, primarily targeting cloud and AI demands. Microsoft's CFO, Amy Hood, anticipates ongoing growth in capital expenditures, noting, "We expect capital expenditures to increase on a sequential basis given our cloud and AI demand signals."

During Alphabet's (Google) third-quarter call, CEO Sundar Pichai stated that embracing AI requires significant capital investment. The company disclosed a capex of $13 billion for the quarter, indicating plans for substantial increases in investment into 2025.

Amazon also weighed in during its Q3 earnings call. CEO Andy Jassy characterized generative AI as a "maybe once-in-a-lifetime type of opportunity" and affirmed the company's commitment to pursuing it aggressively. CFO Brian Olsavsky projected that Amazon's capex for the year would reach about $75 billion, focusing heavily on cloud and AI infrastructure, with plans to introduce "100 new cloud infrastructure and AI capabilities" during an upcoming event.

Even Meta Platforms, although not a cloud provider, has recognized the need for data-driven decision-making and has raised its full-year capex forecast to around $39 billion. CFO Susan Li noted that this growth is aimed at bolstering their AI research and product development for 2025.

Understanding the Importance

The trend towards increased capital spending to meet rising AI demands is unmistakable. A significant portion of these expenditures will likely support the data centers and servers vital for cloud computing, which host most generative AI software. Consequently, Nvidia stands to gain significantly from this spending spree.

Although Nvidia has been discreet about its major clients, analysts have identified the top four customers who account for roughly 40% of its sales:

• Microsoft: 15%
• Meta Platforms: 13%
• Amazon: 6.2%
• Alphabet: 5.8%

These companies have clearly outlined their intentions to invest heavily in capital expenditures, particularly aimed at infrastructure that supports cloud computing and AI initiatives. As the leading provider of data center GPUs, Nvidia is well-positioned to benefit from this upsurge in spending.

Mark the Date

Nvidia is set to announce its next quarterly results on Nov. 20. After experiencing impressive triple-digit growth year-over-year for five consecutive quarters, the company has tempered market expectations, suggesting it might achieve revenue growth around 79% this time. While this represents a slowdown, such growth remains substantial.

Investors looking for quick profits in the upcoming three weeks may find themselves disappointed. The stock’s reaction to the earnings report is uncertain, regardless of whether Nvidia meets or exceeds expectations.

Recent history highlights the risks of short-term predictions. Back in June, Nvidia’s stock saw a decline of 27% due to concerns over potential delays in its next-generation Blackwell AI processors, only to rebound dramatically later. This pattern underscores the stock's inherent volatility and the idea that with Nvidia, some ups and downs are expected. However, insights from its major tech customers, along with their historical spending habits, suggest strong growth potential remains for Nvidia.

For investors looking for long-term holdings rather than quick trades, Nvidia stands out as a promising choice to benefit from the growing AI trend. Priced at about 32 times next year's earnings, it still appears to be attractively valued. While the stock's movement before Nov. 20 is unpredictable, there's a strong likelihood that those who purchase Nvidia shares now and hold onto them for several years will be pleased with their decision.

Nvidia, Stock, AI