This top AI stock has soared nearly 200% this year.
Nvidia (NVDA 2.09%) has proven to be an excellent investment over the short and long terms. The stock has soared 2,700% in five years and so far this year, is heading for an increase of almost 200%.
The reason behind this is simple: Nvidia has built an artificial intelligence (AI) empire, serving one of today’s highest-growth areas. The current $200 billion AI market is forecast to reach $1 trillion by the end of the decade. As this growth takes place, Nvidia could be one of the biggest winners.
The tech company’s dominance in AI chips and related products and services has helped it report triple-digit revenue growth in recent times, and at rock-solid levels of gross margin. If you haven’t gotten in on Nvidia yet, though, you may be wondering whether now — ahead of the upcoming earnings report — would make a good time to invest in this hot stock. Below are two reasons to buy Nvidia before the Nov. 20 report — and one reason to wait.
Image source: Getty Images.
Reason to buy: Potential update on Blackwell
Nvidia is heading for a big moment, and the company probably will give us an update during the fiscal 2025 third-quarter earnings report next week. The tech powerhouse is launching its new Blackwell architecture and best-performing chip ever during the fourth quarter. It aims to ramp up production and generate billions of dollars in revenue during this time period, Nvidia said during its last earnings report back in August.
The tech giant also said at the time that demand for Blackwell surpassed supply, and this is expected to continue into next year. This tells us that customers are flocking to Nvidia for the new platform — and are even willing to wait for it.
The company has offered updates about the Blackwell launch during past earnings reports this year, so as we approach the key moment, it’s likely we’ll learn more about this major new release. Considering the forecast for billions in revenue as of the very first quarter of commercialization, there’s reason to be optimistic about Blackwell as a new growth driver for Nvidia.
If this top AI player offers us confirmation of these points — and potentially additional positive details — the stock could soar after Nov. 20.
Reason to buy: Reasonable valuation in the world of growth stocks
Nvidia isn’t the cheapest stock on the block, trading at more than 50x forward earnings estimates today. But it’s important to put this into perspective. For a growth stock involved in AI, it’s not the most expensive stock, either. Software company Palantir Technologies and cybersecurity giant CrowdStrike both trade at much higher levels by the same measure, for example.
NVDA Price-to-Earnings Ratio (Forward) data by YCharts.
Nvidia actually looks reasonably priced at today’s level when considering both its track record and potential for earnings growth in the years to come. As mentioned, revenue has soared and a gross margin level of more than 70% shows solid profitability on sales. Moving forward, growth in the AI market, Nvidia’s position as a leader, and the company’s focus on innovation to stay ahead should keep earnings marching higher.
Potential good news from Nvidia on Nov. 20 could push the stock higher, lifting its valuation, too. All of this makes Nvidia look like a great long-term growth stock to get into at today’s price.
Reason to wait: Long-term investing means you don’t have to time the market
Nvidia makes a great buy today because it’s reasonably priced, considering its prospects, and may get a boost from any positive news on Blackwell during the upcoming earnings report. However, long-term investors don’t have to rush into a particular stock to benefit from a potential short-term move.
This is because share performance over a period of a few days or weeks won’t have much impact on returns if a stock is held for five years or longer. This is great news because you don’t have to worry about timing the market and feeling disappointed if you miss out on one particular period of gains. If the company is solid and has bright long-term prospects, positive share-price performance will happen over time.
All of this means that there are some good reasons to buy Nvidia right now, ahead of the earnings report. However, if you’d rather wait — or need to wait to free up cash to invest — don’t worry. An investment after the report or even further down the road still may score a big win for your portfolio over the long haul.
Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CrowdStrike, Nvidia, and Palantir Technologies. The Motley Fool has a disclosure policy.