Is It Time to Invest in Nvidia Stock Before Nov. 20?

The stock of Nvidia continues to perform remarkably well, but the question arises: has the company's rapid growth reached its limit?

The momentum around artificial intelligence (AI) adoption remains strong, yet some investors are alert for potential downturns. Supportive economic conditions in the U.S. and quite impressive quarterly results from AI-focused companies contributed to the Nasdaq Composite achieving new record highs recently. However, these positive outcomes are also making some investors cautious, leading them to speculate whether this bull market has gotten ahead of itself.

Nvidia (NVDA) has established itself as a key player in the generative AI space. The company plans to announce its fiscal 2025 third-quarter results in under three weeks. There is significant anticipation on Wall Street as investors are eager to glean insights regarding the current state of AI adoption from this report. Since early last year, Nvidia's revenue has skyrocketed, resulting in a staggering stock price increase of 833% (as of the latest figures). It currently sits less than 5% below the all-time high reached just last month.

With so much at stake leading up to this financial report, many shareholders are pondering if now is the right moment to buy stock in Nvidia before its Nov. 20 announcement. Fortunately, emerging data can help answer this question.

Nvidia's Success Outlined

A significant contributor to Nvidia's remarkable achievements in recent years is the performance of its graphics processing units (GPUs). These chips are essential for delivering the necessary computational power for generative AI and various cloud computing applications. The vast amount of data and resources involved limits the ability of leading AI models to smaller tech companies, funneling the demand to some of the biggest players in technology and cloud services, most of whom are Nvidia clients. Insights from the recent quarterly results of these tech giants provide critical context for understanding AI's progress.

For instance, Microsoft (MSFT) reported substantial investments towards its AI initiatives during its fiscal 2025 first quarter ending on Sept. 30. Microsoft disclosed capital expenditures (capex) of $20 billion mainly for cloud and AI support, and CFO Amy Hood anticipates a rise in these expenditures going forward, stating, "We expect capital expenditures to increase on a sequential basis given our cloud and AI demand signals."

In addition, Alphabet (GOOGL) CEO Sundar Pichai mentioned in their Q3 earnings call that significant capital investment is essential to leverage AI opportunities. The company revealed a capex of $13 billion for the quarter with expectations of "substantial increases in capital investment... going into 2025."

Meanwhile, Amazon (AMZN) CEO Andy Jassy dubbed the generative AI opportunity "maybe once-in-a-lifetime," emphasizing an aggressive approach towards this sector. The company announced planned capex of around $75 billion for this year, prioritizing AI and cloud infrastructure. Additionally, Amazon is set to introduce "100 new cloud infrastructure and AI capabilities" at the upcoming AWS re:Invent conference.

Moreover, Meta Platforms (META), while not a cloud provider, boasts a daily audience of 3.29 billion across its social media platforms, giving it an abundance of user data. They have raised their full-year capex outlook to approximately $39 billion and expressed expectations for significant expenditure growth in 2025 to bolster their AI research and development efforts.

Analyzing the Trends

The clear trend indicates escalating capital expenditures to meet rising demand for AI. Much of this funding will be directed toward data centers and servers that support cloud computing, where most generative AI applications are deployed. Consequently, Nvidia is set to benefit significantly from this trend.

While Nvidia has traditionally kept details about its major customers under wraps, analysts from Bloomberg and Barclays Research have surmised that Nvidia’s top four customers account for about 40% of its sales. These key players include:

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

All these companies have openly stated their plans for substantial capital expenditure to enhance their AI and cloud computing infrastructure. As Nvidia leads in providing GPUs for data centers, it is expected to be one of the significant beneficiaries of this spending.

Important Dates Ahead

Nvidia is set to release its next quarterly results on Nov. 20. After demonstrating remarkable triple-digit growth year-over-year for five consecutive quarters, the company is tempering expectations this time. Nvidia anticipates revenue growth to be around 79%, which, while lower than previous quarters, remains impressive by most standards.

Investors looking for quick gains in the upcoming weeks might find themselves disappointed, as uncertainty looms over how Nvidia's stock will respond to the earnings announcement, irrespective of whether it surpasses expectations.

A look back at this past summer illustrates the unpredictable nature of such short-term forecasts. Nvidia stock experienced a drop of up to 27% in mid-June over concerns that delays might affect the release of its next-generation Blackwell AI processors. Yet, the stock quickly rebounded, underscoring the volatility associated with this investment.

However, the positive comments from Nvidia's major technology clients combined with historical spending trends strongly suggest a promising future for the company. For those investors willing to hold onto their shares for several years, Nvidia stands out as a strong candidate to capitalize on the ongoing AI revolution. Currently priced at about 32 times next year’s earnings, it remains an appealing investment opportunity. While it's challenging to predict Nvidia's immediate stock movements leading up to Nov. 20, it's reasonable to assert that those who invest in Nvidia now and hold for three to five years are likely to be pleased with their decision.

Nvidia, Stock, AI