Should You Invest in Nvidia Stock Before Nov. 20?

The stock of Nvidia, a leading GPU maker, continues to exceed expectations, but many investors are questioning if the company’s rapid growth has begun to taper off.

The rise of artificial intelligence (AI) is ongoing, prompting some investors to remain cautious. A strengthening U.S. economy and solid quarterly results from various AI-focused companies propelled the Nasdaq Composite to a record high last week. However, these developments have also sparked concerns that the current bull market may be maturing.

Nvidia (NVDA) is at the forefront of the generative AI industry. With its fiscal 2025 third-quarter results set to be released soon, anticipation is building on Wall Street for insights that the report may reveal regarding AI adoption. Since the beginning of last year, Nvidia's sales have skyrocketed, resulting in an impressive stock increase of 833%, coming close to its all-time high.

As this upcoming financial report approaches, shareholders are left wondering if the stock can maintain its extraordinary momentum. Is it a wise decision to purchase shares before the report on Nov. 20? Fortunately for potential investors, compelling data is emerging that may help answer this query.

The Bright Side Amid Uncertainty

Nvidia’s remarkable achievements over the past few years are largely attributed to its graphics processing units (GPUs). These GPUs are crucial for providing the computational power required by generative AI and various cloud computing applications. The scale of data and resources needed means that only the largest tech firms and cloud service providers can deploy top-tier AI models, most of which are Nvidia’s clients. Recent earnings calls from these tech giants offer insight into the AI market’s state.

For instance, Microsoft (MSFT) revealed significant investments to drive its AI projects during its fiscal 2025 first quarter, reporting capital expenditures of $20 billion to primarily support cloud and AI demands. Microsoft’s CFO indicated a continued increase in spending due to positive demand signals.

Additionally, during its third-quarter earnings call, Alphabet (GOOGL) CEO Sundar Pichai emphasized that capital investment is essential for AI development. The company reported $13 billion in capex for the quarter and anticipates bigger investments moving into 2025.

Amazon (AMZN), another leading cloud provider, echoed similar sentiments in its Q3 earnings report. CEO Andy Jassy referred to generative AI as a major opportunity, with estimates of nearly $75 billion in capex this year, predominantly targeting AI and cloud infrastructure. Amazon plans to showcase new cloud and AI features soon.

Although Meta Platforms (META) is not a cloud provider, its vast user base generates significant data. The company raised its capital expenditure projection to about $39 billion for the year, aiming to foster its AI research and product development.

The Importance of These Trends

The clear trajectory shows an increase in capital expenditures to meet the growing demand for AI technology. A significant portion of this funding will be directed toward the data centers and servers that support cloud computing, where most generative AI software operates. Therefore, Nvidia is poised to benefit immensely from this spending.

Although Nvidia has typically kept the identities of its largest customers under wraps, research by analysts reveals that about 40% of Nvidia’s sales come from its four major clients:

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

All these companies have publicly committed to significant capital expenditures to enhance their AI and cloud computing capabilities, positioning Nvidia favorably as a top supplier.

Key Date Ahead

Nvidia will release its next quarterly results on Nov. 20. Following five straight quarters of over 100% year-over-year growth, Nvidia has tempered expectations, hinting that revenue growth may reduce to around 79%. Though this would indicate a slowdown, it still represents extraordinary growth by any standard.

Investors hoping for short-term gains may be disappointed, as the stock could react unpredictably to the upcoming report, regardless of whether it meets or exceeds expectations.

To illustrate why short-term predictions can be challenging, a recent occurrence in June saw Nvidia’s stock plummet by 27% due to concerns over the delay of its next-generation AI processors, only to rebound swiftly thereafter. This volatility is intrinsic to Nvidia’s stock. Nevertheless, insights from major tech customers and their historical spending trends indicate that Nvidia’s growth is likely to continue.

For investors looking for long-term opportunities, Nvidia represents a strong option to benefit from the ongoing AI boom. Currently trading at approximately 32 times next year's earnings, it remains reasonably priced. Although the near-term performance of the stock leading up to Nov. 20 is uncertain, investors who decide to purchase Nvidia shares now and hold them for three to five years are likely to reap significant rewards.

Nvidia, Stock, AI