Should You Buy Nvidia Stock Before Nov. 20?

The stock of Nvidia, a leading GPU manufacturer, has been rising impressively, but some investors are questioning whether the company's growth has reached its peak.

Artificial intelligence (AI) adoption is accelerating, but there are concerns about the sustainability of this growth. The recent strength of the U.S. economy and the positive earnings reports from various AI-centric companies propelled the Nasdaq Composite to a new high last week. However, these same trends have led investors to wonder if the market has become too optimistic, moving ahead too quickly.

Nvidia (NVDA 1.99%) has emerged as a key player in the generative AI sector. With its fiscal 2025 third-quarter earnings set to be released in under three weeks, many on Wall Street are eagerly awaiting insights regarding ongoing AI adoption. Since early last year, Nvidia's sales have skyrocketed, driving the stock up around 833% as of now, and it is currently less than 5% from its all-time high recorded last month.

There is a significant amount at stake for Nvidia's upcoming financial results, and numerous shareholders are left wondering if the stock can maintain its remarkable ascent. Is it a good idea to purchase Nvidia shares before the financial report drops on Nov. 20? Fortunately for potential investors, emerging data may provide some answers.

Good News Amid Uncertainty

Nvidia's impressive achievements over the last couple of years are primarily due to its graphics processing units (GPUs), which excel in providing the necessary computational power for generative AI and cloud computing applications. The immense resources and vast amounts of data required by top-tier AI models mean that only the largest tech firms—the very ones who are Nvidia's customers—can participate. Insights from these companies' recent earnings calls shed some light on the ongoing AI revolution.

For instance, Microsoft (MSFT 0.99%) reported hefty investments in AI during its fiscal 2025 first quarter (ending Sept. 30), with capital expenditures of $20 billion aimed primarily at cloud and AI-related demands. CFO Amy Hood stated that she expects this capital spending to rise, given the strong signals for cloud and AI demand.

Similarly, Alphabet (GOOGL 0.10%, GOOG -0.02%) CEO Sundar Pichai emphasized that making the most out of AI requires substantial capital investments. The company disclosed $13 billion in capital expenditures during the third quarter and indicated that investment would significantly increase as they head into 2025.

Adding to the conversation, Amazon (AMZN 6.19%) described generative AI as a potential once-in-a-lifetime opportunity it is vigorously pursuing. CEO Andy Jassy noted that Amazon's estimated capital expenditures this year would amount to around $75 billion, with much of it focused on AI and cloud infrastructure. Amazon plans to introduce "100 new AI and cloud capabilities" soon.

Meta Platforms (META -0.07%) also pointed to a commitment to AI, raising its full-year capital expenditure outlook to roughly $39 billion. CFO Susan Li noted a significant anticipated expansion in capital expenditures as the company supports AI research and product development.

Why It Matters

The trend of increasing capital expenditures among major tech companies to foster AI demand is evident. A large portion of this funding will be allocated to data centers and servers essential for cloud computing, where most generative AI applications reside. Hence, Nvidia stands to benefit significantly from this spending.

Historically, Nvidia has kept details about its largest customers private, but research has inferred that its four greatest clients account for about 40% of its total sales:

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

All these companies have communicated their intentions to heavily invest in capital expenditures to support infrastructure for cloud computing and AI. As a leading provider of data center GPUs, Nvidia is expected to remain a primary beneficiary of their investments.

Mark Your Calendar

Nvidia's next quarterly earnings will be announced on Nov. 20. After achieving impressive triple-digit growth year-over-year for five straight quarters, the company is attempting to temper market expectations, projecting revenue growth of approximately 79%. While this represents a deceleration, it is still phenomenal growth.

Investors hoping for quick returns within the next three weeks may be disappointed. The stock's reaction to the earnings report is unpredictable, even if Nvidia surpasses projections.

To illustrate the challenges of short-term betting, one can look back to mid-June when Nvidia's stock lost nearly 27% due to concerns about delays regarding next-generation AI processors, only to sharply recover later. This exemplifies the volatility associated with Nvidia's stock. However, statements from its major tech clients and past spending behaviors suggest continued strong growth ahead for Nvidia.

For those looking to invest in stocks for the long haul, Nvidia stands out as a prime candidate to benefit from the AI revolution. With a current valuation of roughly 32 times next year's earnings, it remains reasonably priced. While the stock's movement until Nov. 20 is uncertain, investors who purchase Nvidia shares now and hold them for three to five years or longer are likely to find it a rewarding decision.

Nvidia, AI, Investing