AI Giants Alphabet and Meta Poised to Outperform Nvidia in Coming Years

Prediction: 2 Unstoppable AI Stocks Will Be Worth More Than Nvidia Stock by 2028 (or Sooner) | The Motley Fool

Meta Platforms and Alphabet could surpass Nvidia's $3.3 trillion market value within four years. Nvidia shares have surged more than 170% year to date amid excitement about artificial intelligence (AI). The chipmaker now has a market capitalization of $3.3 trillion, making it the second-most valuable public company in the world behind Apple. But I think Meta Platforms (META -1.14%) and Alphabet (GOOGL -1.20%) (GOOG -1.14%) can surpass $3.3 trillion in the next three or four years. Here's why: Here's what investors should know about these AI stocks. Meta Platforms owns four of the seven most popular social media networks in Facebook, Instagram, WhatsApp, and Messenger. Nearly 3.3 billion people interact with at least one of those platforms daily, and each interaction creates data that can inform ad campaigns. Those qualities have made Meta the second-largest adtech company in the world. Meta will account for 21.9% of digital ad sales this year, up four-tenths of a percentage point from last year, according to eMarketer. And it could continue gaining share as it leans into artificial intelligence (AI). Its conversational assistant Meta AI has already drawn over 500 million monthly users since launching in April, and AI-driven recommendations have increased time spent on Facebook and Instagram by 8% and 6%,, respectively, year to date. Additionally, over 1 million advertisers used Meta's generative AI tools to create marketing content last month. CEO Mark Zuckerberg estimates those tools have lifted conversions by 7%, and he believes the company can unlock more productivity gains for advertisers in the future. That could certainly lead to market share gains. Either way, Meta has a good shot at annual revenue growth in the high teens through the end of the decade. I say that because the adtech software market is forecast to increase at 22% annually through 2030, and digital ad spending is projected to increase at 15% annually. Meta should manage to split the difference, and the company also has opportunities beyond digital advertising. Most notably, Meta has a nascent but potentially large opportunity in augmented reality (AR). The company recently showcased Orion, its first pair of fully holographic AR glasses. Zuckerberg says, "We're not too far off from being able to deliver great-looking glasses that let you seamlessly blend the physical and digital worlds." Grand View Research estimates the AR market will grow at 38% annually through 2030. With that in mind, Wall Street expects Meta's earning to increase at 21% annually over the next three years. That makes its current valuation of 26.7 times earnings look reasonable, especially when the two-year average is 26.9 times earnings. But Meta regularly beats estimates. So, let's assume earnings grow at 25% annually over the next four years. In that scenario, Meta's market value would surpass $3.3 trillion by 2028 without any change in its price-to-earnings ratio. Alphabet subsidiary Google is the largest digital advertising company in the world. It will account for 27.4%of digital ad spending this year, down six-tenths of a percentage point from the prior year, according to eMarketer. But market share losses are limited to the open internet. The company is leaning into AI to maintain its dominance in search and video advertising through Google Search and YouTube, respectively. To elaborate, Alphabet recently introduced generative AI overviews in Google Search, and CEO Sundar Pichai says engagement and user satisfaction are trending higher. The company is also using its Gemini model to surface relevant content for YouTube users. That has helped YouTube maintain its status as the most popular streaming service in the U.S., as measured by viewing time. Additionally, Alphabet will debut a video generation model called Veo to assist YouTube creators later this year. Beyond advertising, Google is the third-largest public cloud, but it's gaining share. The company accounted for 13% of cloud infrastructure and platform service spending in the third quarter, up two percentage points from the previous year. Strength in AI factored heavily into those share gains. Forrester Research recently recognized Google as a leader in AI infrastructure solutions and foundational large language models. Beyond its core businesses, Alphabet has an opportunity in its autonomous driving subsidiary Waymo. While Waymo is unlikely to be a material source of revenue by 2027, it already factors into overall market value today based on future potential. Bloomberg recently reported that Waymo was valued above $45 billion in the latest funding round, and further progress -- such as the planned launch of autonomous ride-sharing in Austin and Atlanta next year -- could lift Alphabet's overall market value in the coming years. Wall Street expects the company's earnings to increase at 16.7% annually over the next three years. That makes the current valuation of 22.7 times earnings look reasonable. But share gains in cloud computing could lead to faster growth, given that public cloud spending is projected to increase at 21% annually through 2030. So, let's assume Alphabet's earnings climb at 19% annually over the next three years. In that scenario, the company's market value would surpass $3.3 trillion by 2027 without any change in its price-to-earnings ratio.

Prediction: This Stock Will Outperform Nvidia in 2025 | The Motley Fool

Nvidia (NASDAQ: NVDA) has been a top-performing stock for the past two years, and all signs point toward it delivering once again in 2025. However, its growth is also likely to slow, and seeing the stock triple again is not likely in the cards. While I think Nvidia can (and likely will) deliver a market-beating performance, there's another big tech stock that could outperform it in 2025. What stock could possibly outperform the king of artificial intelligence (AI) investing? I think it's Alphabet (GOOG -1.14%) (GOOGL -1.20%), and there are a few reasons why. Alphabet is the parent company of Google. While it has multiple interesting technologies and different product lines, about three-fourths of its revenue comes from advertising. With the rise of generative AI, many investors were worried that a search engine like Google might become obsolete, but that hasn't materialized yet. Furthermore, Google is leaning into this trend, and if a competing product finds some success, Google will likely copy it and launch it before its billions of users switch over. As a result, I think Alphabet will be just fine moving forward, and the results back it up. In Q3, Alphabet's Google Search revenue rose 12.3% year over year. That's solid growth from a mature business segment and gives Alphabet a steady platform to do other things with the rest of its business. Most notably, Google Cloud, its cloud computing division, had a phenomenal quarter, with revenue rising by 35% year over year and delivering a 17% operating margin. This marks a notable growth acceleration from previous quarters, as Google Cloud grew its revenue by 29% in Q2 and 28% in Q1. Management points to its generative AI toolkit as a reason why it's doing so well, as some of the tools it gives developers access to are unparalleled. Although Google Cloud only makes up about 13% of the overall business, its growth boost is noticeable at the top level, as overall revenue grew 15% year over year. That growth, combined with various efficiency efforts and the effects of stock buybacks, allowed Alphabet's earnings per share (EPS) to increase from $1.55 to $2.12 -- a 37% rise. The market loved this quarter, which is why the stock was up following the results. But with all due respect to Alphabet, this isn't even close to the numbers Nvidia is putting up. So, how can Alphabet outperform Nvidia in 2025? For many reasons, Alphabet doesn't carry nearly the premium on its stock as Nvidia does. Right now, Alphabet trades for a mere 22 times forward earnings compared to Nvidia's 49. This is a huge price difference, and it shows how expensive Nvidia's stock is and how cheap Alphabet's stock is. In fact, Alphabet's stock is actually cheaper than the broader market as measured by the S&P 500, which trades for 24 times forward earnings. Compared to other big tech companies, Alphabet is also dirt cheap. Just take Microsoft, for example. In its Q1 FY 2025 (ending Sept. 30) results, EPS rose a mere 10%, yet the stock trades at 31 times forward earnings. Apple's best quarter since 2022 began saw 16% EPS growth, yet it trades for 30 times forward earnings. Essentially, the market is saying Alphabet is a below-average company, which makes no sense considering that Alphabet's EPS is growing much quicker than the average company in the index. On the flip side, Nvidia's growth is expected to slow down next year, with FY 2026 (ending January 2026) EPS expected to rise about 43%.That slowdown will come with a decreased valuation. So, while Alphabet may not be growing as fast as Nvidia, the combination of Alphabet's expanding earnings multiple and Nvidia's likely decreasing multiple, it could boost Alphabet to the performance levels needed to outperform Nvidia in 2025. Whether or not it can outperform Nvidia in 2025, Alphabet is still one of the best values in the market today and an excellent stock to buy right now.

Hyperscalers' massive 2025 capex hike for AI means big wins for NVIDIA By Investing.com

Investing.com -- Hyperscalers like Alphabet (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT), Amazon.com (NASDAQ:AMZN), and Meta (NASDAQ:META) reported their third-quarter financial results last week and, with the numbers, also provided updates on their Capex spending plans amid the ongoing AI boom. The numbers and growth are impressive, to say the least. Morgan Stanley (NYSE:MS) internet analyst Brian Nowak highlighted that they now see 2025 capex for the hyperscalers reaching over $300 billion, up 25% from 2024 and nearly double 2023. As a result, the analyst raised their 2025 capex estimates by 9%. The biggest spenders will be Amazon and Microsoft, spending $96.4 billion and $89.9 billion, respectively. "In all, we now expect AMZN/GOOGL/META/MSFT to spend ~$300bn/$335b+ in '25/'26 as they continue to invest in the multi-year GenAI and LLM-enabled opportunities," Nowak commented. "These high and rising capex numbers again speak to the importance of continued disclosure about new/incremental adoption, engagement, and revenue opportunities each of the four companies are seeing and investing in." The biggest beneficiary from all the new spending is NVIDIA (NASDAQ:NVDA), which makes the high-end AI chips needed to power the massive new infrastructure. BofA Securities analyst Vivek Arya expects Nvidia to get over 75% of the AI accelerator market share through 2027. Meanwhile, Advanced Micro Devices Inc (NASDAQ:AMD) and Broadcom Inc (NASDAQ:AVGO) are both expected to get in the mid-single digit share. "We continue to expect the AI accelerator to grow to $280bn by CY27E (and over time toward $400bn+) from just ~$45bn in CY23," Arya commented.

Nvidia to reap billions in AI spending as Mag 7 peers ramp investments

Nvidia hasn't reported its third quarter update as yet, but it's nonetheless the clear winner of the megacap earnings season and stands poised to reap billions in spending on new AI technologies and infrastructure over the coming years. Nvidia (NVDA) , which closed out October with a 9.3% gain, well ahead of the 0.5% advance for the Nasdaq benchmark, has added more than $2 trillion in market value this year thanks to the surge in investment in AI tech and its hammerlock on the chip market that powers it. It was also chosen to replace Intel (INTC) in the Dow Jones Industrial Average on November 8 and, with its now $3.3 trillion in market value, will sit just below Apple (AAPL) as the benchmark's, and the world's second-most valuable company. It's influence on the AI chip market is no less impressive UBS analysts see the four biggest hyperscalers, all of which posted third-quarter earnings this week and form the spine of the global AI-investment race, to spend $267 billion on capital projects tied to the new technologies next year, a 33.5% increase from this year's forecast. Google parent Alphabet (GOOGL) , Facebook parent Meta Platforms (META) , Amazon (AMZN) and Microsoft (MSFT) , in fact, are already poised to spend around $200 billion this year alone in what Amazon CEO Andy Jassy called a "once-in-a-lifetime" opportunity in generative AI. Amazon pegged its 2024 capital spending at around $75 billion, most of which will "support the growing need for technology infrastructure [primarily Amazon Web Services] as we invest to support demand for our AI services." Meta said this year's bill would rise to between $38 billion and $40 billion, with "significant acceleration in infrastructure expense growth next year." Microsoft, which spent $55.4 billion in the financial year that ended in June, will likely shell out $80 billion this year. Google's tally is forecast at $51 billion. Even Tesla (TSLA) , which is chasing CEO Elon Musk's bold ambitions of a fleet of autonomous robotaxis and self-driving electric vehicles, expects to spend around $11 billion this year "largely because of investments in AI compute." Nvidia's commanding market share And Nvidia -- which commands an 80% share of the market for the chips and processors that power not only the massive datasets being trained by the hyperscalers, but also the enterprise customers that would like to apply the technology to everything from restaurant sales to pharmaceutical research -- is poised to reap the benefits. CEO Jensen Huang, in fact, described AI demand last month as "insane," while rival chip-sector boss Lisa Su at Advanced Micro Devices (AMD) forecast the total addressable market for AI accelerators alone would grow more than 60% annually and reach $500 billion by 2028. Meanwhile, total AI spending, which includes software, hardware and services, is likely to more than double to around $632 billion by 2028 from $235 billion last year, according to IDC estimates. Related: Goldman Sachs analyst updates Amazon stock price target after earnings Last year, the entire semiconductor industry, including everything from chips and processors in mobile phones to memory inserts in personal computers, generated $500 billion in sales. CFRA analyst Angelo Zino, however, sees Nvidia as the principal beneficiary as it launches its newest line of chips and processors, dubbed Blackwell, and preps for a next-generation system, called Rubin, in the coming years. "Blackwell will take greater wallet share from hyperscalers amid an AI war in the cloud," Zino said in a recent note. "The supply chain is also confirming the strength of AI demand, improving visibility entering 2025." If you can't beat 'em ... The broader market demand is so compelling that Amazon is getting in on the act by investing in its own high-performance chips, called Trainium, that it can sell directly to clients who may not wish to wait for, or pay for, Nvidia's sought-after products. Amazon told investors on Thursday that some of its cloud customers want "better price performance on their AI workloads" as they scale their operations and look to reduce costs. Microsoft is also working up a new line of AI accelerators, which it calls the Maia 100, to train large-language models. These could both help it wean it from reliance on Nvidia and offer a lower-priced alternative to its Azure cloud customers. Related: Analysts revisit Microsoft stock price targets after Q1 earnings The surge in demand, however, has tested the limits of capacity across the supply chain that Zino cites, in a market that remains dominated by only a handful of assemblers and designers. Taiwan Semiconductor, (TSM) the supply-chain linchpin, told investors last month that "our customers' demand far exceeds our ability to supply," a clear reference to Nvidia. TSM posted record quarterly profit, the equivalent of US$10.06 billion, and forecast a full-year revenue growth rate of around 30%. It also pegged its overall capital spending plans at just more than $30 billion for this year and higher still in 2025. Nvidia earnings next up All this points to another monster quarter for Nvidia when later this month it reports sales and profit for the three months ended in October and its outlook for the coming year. Nvidia told investors in late August that it saw current-quarter revenue in the region of $32.5 billion, more than double the tally of the year-earlier period, even as it faced some delays in shipping its new line of Blackwell processors amid design changes and supply-chain snarls. Related: Legendary billionaire tech investor makes an amazing claim about Nvidia's stock "What we're looking at now is the next wave of AI, and the biggest wave of AI, and this is really all about companies using it to be more productive as well to revolutionize the way they build their products -- and the products they build," Huang told CNBC last month. "Everybody wants to have the most, and everybody wants to be first," Huang told CNBC last month. "Blackwell is in full production, Blackwell is as planned, and the demand for Blackwell is insane." More AI Stocks: Nvidia shares rose 2% in Friday trading to end the session at $135.37 each, a move that extend the stock's six-month gain to around 63%. Related: Veteran fund manager sees world of pain coming for stocks

Should You Forget Nvidia and Buy These 2 Artificial Intelligence (AI) Stocks Instead? | The Motley Fool

These dominant tech firms have long been leaders in the internet age. With shares up 2,620% in the past five years and 184% just in 2024 (as of Oct. 25), Nvidia continues to be the talk of the town. The artificial intelligence (AI) hardware maker is benefiting from strong demand for its products and services, driving rapid growth. Nvidia deserves credit for how it dominates the market for AI infrastructure. It's also very hard to overstate just how unbelievable the share price performance has been. But I believe investors should forget about Nvidia. Perhaps it's a better idea to buy these two AI stocks instead. Investors need to consider two well-known stocks whose products and services they likely use daily. I'm talking about Alphabet (GOOGL -1.92%) (GOOG -1.98%) and Meta Platforms (META -4.09%). These companies have long been leaders in the internet age, and they're poised to be leaders in the ongoing AI race. Alphabet CEO Sundar Pichai shifted the company's focus to being AI-first eight years ago. Thanks to a massive fortress balance sheet, with about $90 billion in total cash and marketable securities, Alphabet has virtually unlimited resources to invest aggressively in tech infrastructure to support its AI ambitions. "The momentum across the company is extraordinary. Our commitment to innovation, as well as our long-term focus and investment in AI, are paying off with consumers and partners benefiting from our AI tools," Pichai said in the Q3 2024 earnings report. Meta and its founder and CEO, Mark Zuckerberg, are also intensely focused on AI. The technology is available in the company's various social media apps, allowing users to create images and get answers to questions. The business also sees a future where AI can drastically help advertisers. "Eventually we got to the point where our ads system could better predict who would be interested than the advertisers could themselves," Zuck mentioned on the Q2 2024 earnings call. The business plans to spend up to $40 billion in capital expenditures this year to support AI ambitions. Besides riding the AI wave, Alphabet and Meta Platforms have other compelling traits that investors should pay attention to. For starters, both businesses dominate the digital advertising market, which is a powerful secular trend that has lots of growth potential. Grand View Research believes the industry will be worth a whopping $1.2 trillion in 2030, expanding at an annualized pace of 15.5% between 2023 and the end of the decade. That favorable backdrop means that Alphabet and Meta should register notable top-line gains in the years ahead. Between 2023 and 2026, revenue at the Google parent is projected to rise at a compound annual growth rate of 11.7%, while sales at the social media giant are slated to increase at an annualized pace of 15.6%. These are certainly encouraging forecasts. Alphabet and Meta both also possess network effects that support their economic moats. Google Search and YouTube become more valuable to their stakeholders the larger they get. The same is true with Meta, as more users results in more content and more connections being made. This setup makes it almost impossible for a rival firm to create competing services that can gain broad adoption, leading to minimal threat of disruption, in my opinion. Lastly, I'll call out just how strong these companies' financial positions are. They both generate tremendous amounts of cash, while also having pristine balance sheets. This reduces financial risk for investors. Nvidia's monumental rise has taken its valuation to high levels. As of this writing, shares trade at a forward price-to-earnings (P/E) ratio of 49.8. Some strong supporters might believe this valuation multiple is justified. But I think the stock is expensive due to the incredible optimism the market has toward this business. In other words, there appears to be no margin of safety embedded in Nvidia's stock right now. Paying the right valuation should be a key part of any investor's decision-making process. Here's where Alphabet and Meta stand out. The former trades at a forward P/E ratio of 22, while the latter can be bought for a 27.4 multiple. These are much more reasonable prices to pay than what Nvidia is selling for. Investors shouldn't overthink it: Buying shares of both Alphabet and Meta can provide adequate exposure to the AI trend.

Nvidia Generated Nearly $50 Billion Thanks to Selling AI Products and Services This Year. But Here's Another -- and Completely Different -- Way AI Will Supercharge the Company's Earnings. | The Motley Fool

Nvidia (NVDA -1.36%) may be the biggest early winner of the artificial intelligence (AI) boom. The tech giant sells the world's most powerful chip along with a complete portfolio of AI products and services, making it the "go to" company for those launching an AI program. And this has produced big results when it comes to earnings and share price performance. The chip designer's shares have soared 2,600% over the past five years and are heading for a 183% increase this year. This is as earnings have taken off. Nvidia has reported triple-digit growth in revenue and profit quarter after quarter, and sales to AI customers make up the lion's share of revenue -- at 87% in the most recent quarter. Nvidia has generated a total of $48.9 billion in data center sales in the first and second quarters of this year -- this is compared to $14.6 billion from the data center business during the same period last year. This sounds fantastic, but data center sales aren't the only way AI will boost Nvidia in the coming years. Let's check out another -- and completely different -- way AI will supercharge this AI giant's earnings. So, first a bit of detail about Nvidia's path so far and what to expect moving forward. The company holds 80% share of the AI chip market due to the top performance of its graphics processing units (GPUs). These powerful chips mainly served the gaming industry several years ago, but their ability to process many tasks at once helped them broaden their reach into other areas -- including AI. And with the AI boom, sales of Nvidia's GPUs and related products took off. The company's $30 billion in total revenue in the most recent quarter is higher than the company's annual revenue as recently as in the 2023 fiscal year. There's reason to be optimistic that this will continue thanks to growth in the general AI market and Nvidia's focus on innovation. Analysts predict today's $200 billion AI market will expand to $1 trillion by the end of the decade -- if this happens, Nvidia, as a leading seller of essential and top performing AI products and services, should benefit. And Nvidia pledges to update its GPUs on an annual basis, a move that should keep it ahead of the competition. Now, let's consider the second way AI will supercharge Nvidia's earnings. This is through the rollout of AI across the entire company. So Nvidia isn't only a maker of AI -- like its customers, it's a user of AI. This should help Nvidia streamline processes, become more efficient, and lower costs over the long term. Nvidia already is using AI in the areas of chip design and supply chain management, chief executive officer Jensen Huang said at the Gartner IT Symposium, according to a Fierce Network report. Huang added that, in the future, the company would have 50,000 employees and more than 100 million AI assistants. Today, Nvidia has about 30,000 employees, so the company does count on significantly growing its human talent base -- but the explosion higher of AI assistants should make this workforce as a whole much more productive and cost-efficient than a human-only one. This is great news for Nvidia's gross margin, which already today -- in earlier days of AI usage -- has reached beyond 70%. Nvidia aims to report gross margin in the mid-70% range in the third quarter and for the full year. Over the long term, with AI assistants making up an enormous part of the company's workforce, Nvidia should be able to keep margins wide. This, along with revenue growth thanks to innovation and general demand, could power earnings higher over the long term. So, yes, Nvidia is a winner in this potential AI revolution thanks to its sales of products and services to customers, but the benefits to the bottom line don't stop there. Nvidia, as a user of its own AI tools, is on the path to improving its processes, making them faster, and keeping costs down. All of this also should play a significant role in earnings growth moving forward -- and this makes Nvidia a compelling AI stock to buy now and hold onto for the long term as this supercharged growth story unfolds.

These Must-See Quotes From Amazon CEO Andy Jassy Are Great News For Nvidia | The Motley Fool

After a couple strong years of gains, artificial intelligence tech stocks have seen volatility over the past summer and into third quarter earnings season. After strong gains in 2023 and into the first half of 2024, concerns arose this past summer over two issues. One, cloud computing giants began greatly increasing their capital expenditures on data centers. That led investors to ask one, would there be a payoff for all that spending? That first concern led to a second concern; if these investments didn't pay off soon, did that make AI a hype-driven bubble set to burst? Fortunately, the largest cloud platform in the world, Amazon (AMZN 6.19%) just reported strong earnings last Thursday, the details of which should greatly reassure AI investors everywhere, especially those concerned about the near-term outlook for AI chip leader Nvidia (NVDA 1.99%). Some investors had come to doubt Amazon Web Services (AWS), the largest cloud computing infrastructure provider in the world, over the past few years, after its growth decelerated in 2022 and 2023. However, it appears AI is heating up AWS's growth prospects again. In the third quarter, AWS revenue surged 19%, marking an acceleration over the prior year's 12% growth, defying the law of large numbers. Not only was revenue growth robust, but cloud computing operating margins expanded from 30.3% a year ago to 38.1%, with AWS's operating income surging an even more impressive 50%. While AWS operating margins can bounce around a lot, the general trend is quite positive. On a trailing 12-month basis, AWS's operating margins expanded almost 10 percentage points, from 25.8% a year ago to 35.3%, which is a massive jump. That means AI isn't just providing strong growth for Amazon, but profitable growth. That last piece is really important, as virtually all big cloud companies are significantly expanding their investments in AI data centers. For Amazon specifically, its capital expenditures on property, plant, and equipment rose 81% to $21.2 billion last quarter. Therefore, to see all that spending pay off in terms of growth and margin in the near-term was a relief. One of the more eye-opening quotations from last Thursday's conference call with analysts was Amazon CEO Andy Jassy giving very positive color around the AI-specific part of AWS. He noted, "AWS's AI business is a multibillion-dollar revenue run rate business that continues to grow at a triple-digit year-over-year percentage, and is growing more than three times faster at this stage of its evolution as AWS itself grew -- and we felt like AWS grew pretty quickly." This quote certainly seems to make the case that the AI revolution isn't a fly by-night bubble waiting to burst. After all, we are really only about two years into the AI revolution, as ChatGPT was first unveiled back in November of 2022. For reference, the original AWS cloud computing platform was first unveiled in 2006, and it's pretty safe to say that if one had invested in Amazon in 2008, two years after AWS started, you would have done quite well indeed. As if this news weren't good enough for Amazon and AI stocks already, Jassy also noted that Amazon's growth would have been even higher if not for capacity constraints: I believe we have more demand that we could fulfill if we had even more capacity today. I think pretty much everyone today has less capacity than they have demand for. ... I actually believe that the rate of growth there has a chance to improve over time as we have bigger and bigger capacity. You heard that right. Jassy believes Amazon's AI business can reaccelerate even further, with the only current constraint today being that of supply. That spells lots of good things for Nvidia (NVDA 1.99%) and its upcoming earnings release. Nvidia's stock sold off after its last earnings report on guidance that was strong, but a tad below "whisper" expectations on Wall Street. Yet we also know that was likely because of a one-quarter delay for its upcoming Blackwell chips. The delay, having to do with a production mask, has been corrected, and Nvidia is now in production for Blackwell. Earlier this month, CEO Jensen Huang forecast "billions in revenue" for Blackwell in the fourth quarter, with some analysts anticipating $10 billion in Blackwell revenue or more in Q4. Therefore, with Amazon and basically all cloud providers saying they are capacity-constrained for the demand they have, Nvidia's guidance on its upcoming Nov. 21 earnings report should be quite strong indeed.

Should You Buy Nvidia Stock Before Nov. 20? The Evidence Is Piling Up, and Here's What It Suggests. | The Motley Fool

The GPU maker's stock continues to defy the odds, but has the company's growth already peaked? The adoption of artificial intelligence (AI) is continuing at a brisk pace, but some are waiting for the other shoe to drop. A strengthening U.S. economy and robust quarterly results from several AI-related companies helped push the Nasdaq Composite to a new record high last week. Yet these same factors have some investors wondering if the bull market has gone too far, too fast. Nvidia (NVDA 1.99%) has become the de facto standard bearer for the generative AI industry. The company is scheduled to report its fiscal 2025 third-quarter results in less than three weeks, and it's not an exaggeration to suggest that Wall Street is on pins and needles waiting for the clues that report will offer about the state of AI adoption. Nvidia's sales have surged since the start of last year, driving the stock up 833% (as of this writing). It's also less than 5% off the all-time high it touched late last month. There's a lot riding on Nvidia's upcoming financial report, and many shareholders are wondering whether the stock can possibly continue its breathtaking run. Is it worth picking up shares ahead of its financial report on Nov. 20? Fortunately for investors, data has begun to pile up that could help answer that question. The key to Nvidia's astounding successes of the past couple of years has been the performance of its graphics processing units (GPUs), which are the best chips for supplying the specific type of computational horsepower necessary for generative AI, as well as other types of cloud computing needs. The necessary resources and the sheer magnitude of data involved limit the top-tier AI models to the world's largest technology companies and cloud providers -- most of which are Nvidia customers. Comments made in conjunction with those tech giants' recent quarterly results provide some insights about the state of the AI revolution -- and the evidence is clear. For example, Microsoft (MSFT 0.99%) said it spent heavily to advance its AI agenda in its fiscal 2025 first quarter (which ended Sept. 30). The company had capital expenditures (capex) of $20 billion, which primarily went to support "cloud and AI-related" demand. CFO Amy Hood expects Microsoft's spending spree to continue: "We expect capital expenditures to increase on a sequential basis given our cloud and AI demand signals," she said. During Alphabet's (GOOGL 0.10%) (GOOG -0.02%) third-quarter earnings call, CEO Sundar Pichai said, "Realizing [the opportunity] of AI requires ... meaningful capital investment." The company revealed capex of $13 billion during the quarter and suggested there would be "substantial increases in capital investment ... going into 2025." Rounding out the big three cloud providers is Amazon (AMZN 6.19%). During its Q3 earnings call, CEO Andy Jassy called generative a "maybe once-in-a-lifetime type of opportunity ... we're aggressively pursuing it." CFO Brian Olsavsky put that in context, saying Amazon's capex would amount to roughly $75 billion this year, with much of that going toward cloud computing and AI infrastructure. The company also said it would unveil "100 new cloud infrastructure and AI capabilities" at AWS re:Invent later this month. Finally, there's Meta Platforms (META -0.07%). While it isn't a cloud provider, the company's social media sites attract 3.29 billion people every day, giving Meta vast volumes of user data. The company increased its full-year capex outlook to roughly $39 billion, and CFO Susan Li said, "We continue to expect significant capital expenditures growth in 2025." She previously noted this was "to support our AI research and product development efforts." The trend of accelerating capex to support the growing demand for AI is clear. Additionally, a large fraction of that money will be spent on the data centers and servers needed for cloud computing -- where the majority of generative AI software lives. As such, Nvidia will likely be the recipient of a good deal of this spending. Nvidia has historically kept mum about its biggest customers, but that hasn't stopped Wall Street from doing some digging. Analysts with Bloomberg and Barclays Research have run the numbers and come to the conclusion that Nvidia's four biggest customers -- generating a total of 40% of its sales -- are: Each of these companies has left no question about their plans to spend heavily on capital expenditures, and in particular to spend heavily on infrastructure to support their cloud computing and AI aspirations. As the leading provider of data center GPUs, Nvidia will likely continue to top the list of beneficiaries of that spending. Nvidia will deliver its next set of quarterly results on Nov. 20. After achieving triple-digit-percentage year-over-year growth for five consecutive quarters, the company has tried to rein in the market's expectations, suggesting that its revenue growth this time will only clock in at about 79%. While that would be a deceleration, it would also still be remarkable growth by any stretch of the imagination. Investors looking to make money over the coming three weeks might be disappointed. No one can say for sure how Nvidia stock will react to the report -- even if the company exceeds expectations. For a reminder of the difficulties involved in short-term prognostication, investors need only look back to this summer, when, starting in mid-June, Nvidia stock lost as much as 27% of its value on fears that its next-generation Blackwell AI processors would be delayed -- only to come roaring back. It was an illustration that with this stock, volatility is part of the cost of admission. That said, both the comments made by its big tech customers and their historical spending patterns suggest that Nvidia has further strong growth ahead. For investors looking for stocks to hold for years and decades rather than weeks and months, Nvidia is a clear choice to benefit from the AI revolution. And trading at roughly 32 times next year's earnings, it's still attractively priced. I can't say for sure what the stock will do between now and Nov. 20. What I can say -- with a fair degree of confidence -- is that investors who buy Nvidia stock soon and hold it for three to five years or more will be very glad they did.

Nvidia Has Been the Undisputed King of the Artificial Intelligence (AI) Revolution. Has the Chipmaker Finally Met Its Match? | The Motley Fool

The company has been the poster child for advances in AI, but there might be a new sheriff in town. There's no question that Nvidia (NVDA 1.99%) has been the principal beneficiary of recent advances in artificial intelligence (AI). The company's graphics processing units (GPUs) quickly became the gold standard for generative AI, capturing a stunning 92% of the data center GPU market, according to market researcher IoT Analytics. Nvidia has parlayed that dominance into five consecutive quarters of triple-digit year-over-year sales and profit growth. Many competitors have tried to keep up with the company's relentless pace of innovation, but none have succeeded. Just this year, Nvidia revised its product release cadence from two years to every year, making it even tougher for rivals to compete. However, a recent entrant into the AI marketplace is making waves and could mark the first real competition Nvidia has faced. Cerebras Systems is an AI company founded in 2016, and there have recently been rumblings of an IPO on the horizon. The company believes that "AI is the most transformative technology of our generation." Cerebras developed the Wafer-Scale Engine (WSE) -- a giant semiconductor that is taking a different approach to accelerating AI. The WSE boasts 4 trillion transistors and integrates 900,000 compute cores and 44 gigabytes of Static Random Access Memory (SRAM) into the chip itself. Cerebras claims that its unique construction reduces latency -- or the lag resulting from data transmission -- making the third-generation WSE "the world's fastest commercially available AI training and inference solution." In August, Cerebras launched what it called "the world's fastest AI inference," which it claims is 20 times faster than Nvidia's GPU-based solutions at a fraction of the cost. In a press release that dropped last week, Cerebras updated its claims, saying it tripled its "industry-leading inference performance, setting [a] new all-time record." The company said its tests with Llama 3.2 -- the recently upgraded generative AI model from Meta Platforms -- were "16x faster than any known GPU solution, and 68x faster than hyperscale clouds." While AI-centric efforts by Nvidia and Cerebras have some overlap, it's important to take a step back and put the rivalry in context. Nvidia's chips have a track record dating back 25 years and have stood the test of time. These GPUs dominate a variety of tasks and markets, including video game graphics cards, data centers, earlier branches of AI, and -- most recently -- generative AI. Beyond its processors themselves, Nvidia has taken a more holistic approach, creating software, switches, links -- and even entire plug-and-play systems -- that work together to accelerate the performance of its processors. Additionally, Nvidia is deeply entrenched in the enterprise world, while Cerebras is a relative Johnny-come-lately. It's effortless for businesses to adopt Nvidia's AI solutions, which are relatively easy to deploy. This represents a challenge for Cerebras, as potential customers will have to reengineer their systems to incorporate its technology. The switching costs involved may be substantial, which could act as a competitive moat for Nvidia. Furthermore, businesses are less eager to spend heavily on technology that is unproven and has yet to stand the test of time. Finally, there's the matter of customer breadth. Nvidia counts many of the most well-known companies in the world as its customers, though it gets an estimated 46% of its revenue from just four customers. While Nvidia is mum about who those are, they are widely believed to be Alphabet, Amazon, Meta Platforms, and Microsoft. Cerebras, on the other hand, derived 83% of its 2023 revenue from just one customer -- G42 in the United Arab Emirates -- which represented 87% of its sales during the first six months of this year. Any change in direction or falling out between the two companies could put Cerebras in dire straits, potentially leaving its other customers -- few though they may be -- in a difficult position. Perhaps more concerning is the fact that lawmakers in the U.S. have expressed concerns about G42, citing the company's "extensive business relationships with Chinese military companies, state-owned entities, and the PRC [People's Republic of China] intelligence services." This history and concerns of U.S. regulators could limit Cerebras' business dealings with G42 and dent its future prospects. To be clear, Cerebras offers a unique solution that represents a new level of competition for Nvidia that its other rivals have yet to achieve -- so it certainly bears watching. However, the company will need to clear a great many hurdles before it represents a significant challenge to Nvidia. Cerebras has made a number of claims that still need to be put to the test. It will ultimately be customer demand that will decide whether Cerebras has what it takes to take on Nvidia. Until then, however, Nvidia remains the king of the AI revolution. While it currently sells for roughly 34 times next year's sales, Nvidia's long track record of success, industry dominance, and entrenched position make it the name to beat.

Prediction: The Fourth Quarter Will Be Huge for Nvidia | The Motley Fool

This top artificial intelligence (AI) player is about to enter a new phase of growth. The past several quarters already have been pretty successful for Nvidia (NVDA 1.99%). The company has built an artificial intelligence (AI) empire thanks to its strengths in the technology customers need to fuel AI projects. Nvidia's AI chips, or graphics processing units (GPUs), are the fastest around, and customers are flocking to the company for them -- even if they have to wait due to demand outstripping supply. All this has resulted in triple-digit earnings growth quarter after quarter and stock price gains of 2,600% over the past five years. Momentum hasn't slowed this year, with the stock heading for a 185% increase. Though Nvidia forecasts double-digit revenue growth for the third quarter, I don't see this as a slowdown. In fact, my prediction is the next period -- the fourth quarter -- will be huge for Nvidia. Let's find out why. First, a quick summary of the Nvidia story so far: The company has become almost synonymous with AI due to its dominance in the market, with sales to AI customers making up 87% of its total revenue. But this wasn't always the case. Nvidia started off mainly serving the video game market with its GPUs. It soon became clear, though, that these chips -- with the ability to process multiple tasks simultaneously -- could be valuable in many other areas. Nvidia developed the parallel computing platform, CUDA, to make this happen, and progressively the company broadened its reach into other industries. And as the AI boom took hold, Nvidia's GPU found its next massive growth driver. But Nvidia didn't stop with just the GPU, and instead expanded its AI offerings to include a wide range of products and services to make itself the one-stop shop for any AI project. Nvidia is "the on ramp" to the AI world, chief executive officer Jensen Huang said in a recent interview on podcast BG2Pod. And the company indeed has all the major AI market participants on board, counting companies such as Meta Platforms and Amazon as customers. In fact, in recent times, Oracle co-founder Larry Ellison said he and Tesla chief Elon Musk took Huang out to dinner and "begged" for more GPUs. So, it's clear Nvidia has a solid position in AI, a market set to grow from $200 billion today to $1 trillion by the end of the decade, and this has translated into an explosion in earnings and share performance in recent years. Now, let's get back to my prediction. Even as Nvidia forecasts slower growth in the third quarter, why will the fourth quarter be so big for the company? It's not yet clear if fourth-quarter revenue growth also will fall into the double-digit range, but even if it does, this shouldn't be viewed as weak performance. Nvidia's comparison periods have gotten tough, since revenue already has reached extremely high levels -- and this makes sustained triple-digit growth nearly impossible. What should make the fourth quarter a standout one for Nvidia is the launch of its much-awaited new architecture, Blackwell, and the most powerful chip yet. Nvidia plans to ramp production in the quarter and even bring in billions of dollars in revenue during the period. So, the fourth quarter will represent the first quarter of Blackwell revenue. Nvidia says demand for Blackwell has surpassed supply, which will continue into next year, showing that customers are flocking to the company for this new product. Meanwhile, demand for current architecture, Hopper, remains strong, so it too should significantly contribute to revenue in the last quarter of the fiscal year. (Customers continue to buy these "older" products, since Nvidia continues to update its entire platform so that all parts seamlessly work together.) Nvidia shares have soared, leaving them trading for 49x forward earnings estimates. While this isn't dirt cheap, it remains reasonable for an AI leader at this stage of its story. Nvidia, with the Blackwell launch on the horizon and a pledge to continue innovating on an annual basis, has room to run -- and my prediction is that the fourth quarter will be a big moment for Nvidia and may even launch this next wave of gains.

Up 193%, Is Nvidia Stock Still a Buy? | The Motley Fool

For decades, big tech has been hunting for the next game-changing technology that could transform people's lives and add trillions to the global economy. Many think generative artificial intelligence (AI) could be the one. And Nvidia (NVDA -3.76%) has benefited from a surge in demand for its AI-capable chips to power the new industry. But with its shares up 193% so far in 2024, is it too late for new investors to bet on the company? Let's dig deeper into what the future could hold. There is no shortage of grandiose projections for the long-term AI opportunity. Analysts at Bloomberg expect the market to "explode" -- growing at a compound annual growth rate (CAGR) of 42% to $1.3 trillion by 2032. In the near term, they expect expansion to come from training and inference hardware for large language models (LLMs). So far, things seem to be moving at an even faster pace than they expected. With an estimated share of 75% to 95% in the market for AI-capable graphics processing units (GPUs), Nvidia's hardware business can be used as a proxy for the AI infrastructure opportunity as a whole. And the company's second-quarter earnings show impressive momentum. Revenue soared 122% year over year to $30 billion. And this result was driven mainly by a 154% surge in Nvidia's data center segment, where it sells top-of-the-line chips like the h100 and h200 to cloud computing giants like Alphabet, Microsoft, and Amazon. Demand seems to be dramatically outstripping supply, allowing Nvidia to boast an eye-watering gross margin of 76% and an operating profit of $7.8 billion. As far as AI hardware is concerned, Nvidia seems to be doing everything it needs to do to remain on top. The company's high gross margin suggests it has a strong economic moat -- an advantage that makes it harder for rivals to compete, even though they are trying. Companies like Advanced Micro Devices also make AI chips (such as the Mi300n Series) designed as an alternative to Nvidia's flagship chips. However, Nvidia helps maintain its market share with CUDA, a software solution designed to help clients get the most out of their infrastructure. Developers trained on Nvidia hardware and software have tended to be reluctant to switch to rival providers despite the high prices. The company aims to maintain its momentum with new products, such as its next-generation Blackwell chips designed to dramatically boost AI training speed and efficiency compared to previous models. On the surface, Nvidia is in a perfect position for continued dominance. And the company's remarkably low valuation is the icing on the cake. With a forward price-to-earnings (P/E) multiple of just 36, shares trade for only a slight premium to the Nasdaq-100 index average of 32. This is a low price to pay for a company growing at a triple-digit rate. However, there are some reasons why investors may want to limit their exposure. For starters, the vast majority of AI industry growth is coming from infrastructure, not consumer-facing applications (software and services). Until this dynamic changes, Nvidia's business is on shaky ground. Furthermore, Nvidia's cloud computing clients could eventually face shareholder pushback because of their high infrastructure spending with little to show for it. Some are already turning to less-expensive custom chips built by other chipmakers like Broadcom. While Nvidia's near-term prospects look strong, longer-term investors may want to proceed with caution until some of these challenges are addressed.

Billionaire Ken Fisher Is Piling Into Artificial Intelligence (AI) Colossus Nvidia and Dumping Shares of Its Primary Rival | The Motley Fool

While more than a half-dozen billionaire money managers are selling shares of Nvidia, Fisher Asset Management continues to build its stake in Wall Street's artificial intelligence (AI) darling. In the mid-1990s, the proliferation of the internet began charting a new course for corporate America. The ability to meet customers in virtual storefronts opened never-before-seen sales channels for businesses and positively altered the growth trajectory of the U.S. economy. Since then, investors have been waiting decades for the next big technology or innovation to drive businesses forward. The rise of artificial intelligence (AI) might just be this next step. The lure of AI has to do with its broad-reaching scope. AI-driven software and systems have the capacity to become more proficient at their assigned tasks over time, as well as learn new tasks, all without human intervention. The analysts at PwC foresee productivity improvements and consumption-side effects from the AI revolution adding $15.7 trillion to the global economy come 2030. While a $15.7 trillion addressable market leaves room for plenty of winners, no company has more directly benefited from the rise of AI than Nvidia (NVDA -0.72%). Nvidia's valuation has increased by north of $3 trillion since the start of 2023 -- and billionaire investors have taken notice. Interestingly, more than a half-dozen billionaire money managers were sellers of Nvidia stock during the June-ended quarter. But as required Form 13F filings with the Securities and Exchange Commission show, at least one billionaire asset manager has remained an avid buyer. Nvidia's biggest billionaire supporter looks to be Ken Fisher of Fisher Asset Management. Fisher's hedge fund closed out the midpoint of 2024 with close to $230 billion in assets under management, which was spread across almost 1,000 securities. Nvidia clocked in as Fisher Asset Management's third-largest holding by market value, as of the closing bell on June 30. During the second quarter, Fisher oversaw the addition of 2,103,107 shares, which increased his fund's position to more than 93.4 million shares. Adjusting for Nvidia's 4-for-1 stock split conducted in July 2021, as well as its historic 10-for-1 split in June 2024, Fisher's stake has nearly doubled from approximately 48.6 million shares in June 2021 to 93.4 million shares. The plain-as-day attraction to Nvidia has to do with its absolute dominance in the AI-graphics processing unit (GPU) arena. According to estimates from the semiconductor analysts at TechInsights, Nvidia shipped approximately 98% of all GPUs to data centers in 2022 and 2023. With orders backlogged for its ultra-popular H100 GPU (commonly known as the "Hopper") and successor GPU architecture (Blackwell), it doesn't appear as if it'll be ceding much of its monopoly like market share in 2024. The upcoming launch of Blackwell is particularly exciting given its advancements in computing capabilities for generative AI, as well as its improved energy efficiency, when compared to its predecessor chip. Blackwell should allow Nvidia to maintain its computing superiority, which is what helped the company land big orders from most of the "Magnificent Seven." Although Nvidia's hardware is doing the heavy lifting, the company's CUDA software platform is playing an equally important role in keep clients loyal to its ecosystem of products and services. CUDA is the toolkit used by developers to train large language models and maximize the potential of Nvidia's GPUs. Fisher and his investment team are likely also enamored with Nvidia's incredible pricing power. Nvidia has been charging $30,000 to $40,000 for the Hopper, which marks a premium of 100% to 300% over competing AI-GPUs. Commanding a significantly higher price point for its chips has helped the company pad its pockets. While I'd argue there are plenty of reasons to be concerned about Nvidia as an investment, including history, increasing internal competition, and persistent insider selling, billionaire Ken Fisher remains a big supporter of Wall Street's AI darling. However, Fisher's hedge fund wasn't a buyer of AI stocks across the board during the June-ended quarter. The artificial intelligence stock Ken Fisher and his crew aggressively sold was Nvidia's chief rival, Advanced Micro Devices (AMD 2.36%). When the March quarter came to a close, Fisher Asset Management was holding close to 28.9 million shares of AMD, which had a market value of around $5.2 billion. Just three months later, Fisher sent 5,716,366 shares of AMD to the chopping block, representing about 20% of its previous stake. Profit-taking is one viable catalyst for this selling activity. Between the start of 2023 and April 2024, shares of AMD came close to tripling in value. With Fisher Asset Management being a fairly active hedge fund, regular profit-taking is common. But there might also be more to this story than meets the eye. For example, Fisher might simply favor Nvidia's ability to hang onto the lion's share of the AI-GPU market for high-compute data centers. Even with Advanced Micro Devices meaningfully increasing production of its MI300X AI-GPU, and recently introducing its MI325X GPU, which will go into production before the end of this year, enterprise demand has overwhelmingly favored Nvidia to this point. Ken Fisher and his team may have also been less than enthused about AMD's valuation. Though its common for fast-growing tech stocks sporting game-changing innovations to trade at a premium to the broader market, AMD hasn't been growing all that fast. Sales growth in 2024 is forecast to come in around 13%, which doesn't exactly justify shares trading at a consensus of 46 times expected earnings per share (EPS). To build on this point, AMD is a highly cyclical business -- and there are reasons to believe the going could get rougher for the U.S. economy in the upcoming year. The first notable drop in U.S. M2 money supply since the Great Depression, along with the longest inversion of the yield curve in history, have historically correlated with downturns in the U.S. economy. An economic contraction would expose AMD's premium valuation and subpar growth rate Lastly, Fisher might be concerned about continued post-COVID-19 weakness from personal computers (PCs). During the initial stages of the pandemic, when people were forced to work from home, sales of PCs soared. But with life returning to normal, demand for PCs has waned in a big way.

Billionaire Paul Tudor Jones Just Sold all of His Palantir Shares and Is Piling Into This AI Stock Split Stock With a Massive Catalyst on the Horizon | The Motley Fool

The stock Jones is buying could excel in the near term and down the road. Investors have flocked to artificial intelligence (AI) stocks this year, and as a result these technology players have led gains in the S&P 500, helping the index climb more than 21%. Why such an interest in AI? Because it has the potential to transform many industries, making companies more efficient and profitable -- and even resulting in major discoveries like life-saving new medicines or high-performance autonomous vehicles. Today's AI market already is worth more than $200 billion, and analysts predict this will expand to more than $1 trillion by the end of the decade. Companies that are developing AI tools or using AI to improve their businesses should be the first to benefit, and they will share the win with investors. This hasn't escaped the attention of billionaire investors, who have been heavily investing in AI companies. But they aren't buying all AI players right now, and at this stage of the story, are making key decisions about which companies have the most to gain in the months ahead. Billionaire Paul Tudor Jones of Tudor Investment is the perfect example. He recently sold his entire Palantir Technologies (PLTR 0.24%) stake and piled into an AI player that completed a stock split this year -- and has a huge catalyst on the horizon. Let's find out more. First, a quick note on why investors closely watch Jones' investing moves. Not only has he built a fortune since the founding of his firm back in 1980, but this top investor made headlines when he shorted the market ahead of Black Monday in 1987 -- this bet against stocks generated a $100 million profit. In more recent times, the top investor has spoken about the great potential of AI. The technology will drive a productivity boom that should push stocks higher for years to come, Jones said last year in a CNBC interview. So, it's no surprise that Jones is investing in many top names involved in AI, from Microsoft to Amazon. And in the second quarter, Jones sold all of his shares in one of the year's best-performing AI stocks, Palantir, and added to a position of another AI giant. This player's stock rose so much over the past five years -- 2,700% -- that it completed a stock split back in June, lowering the per share price to make it more accessible to a broader range of investors. I'm talking about AI giant Nvidia (NVDA -0.72%). Jones sold 126,594 shares of Palantir and increased his position in Nvidia by 853% to 273,294 shares. We don't know the exact reason behind the investor's decision, but it's true that as Palantir stock climbed, valuation exploded higher -- reaching levels that look pricey today at 122x forward earnings estimates. Though Palantir's long-term story still looks strong, today's valuation could limit gains in the near term as investors turn to companies trading at more reasonable levels. Nvidia, too, has soared this year, but trading at 49x forward earnings estimates, the stock could have room to run -- especially since a huge catalyst lies just ahead. Nvidia plans to launch its new architecture, Blackwell, and fastest chip ever in the coming weeks. The company says it will ramp production in the fourth quarter and even generate billions of dollars of revenue during that period. Demand already has surpassed supply, supporting Nvidia's revenue predictions. Today, Nvidia is the world's No. 1 AI chip player, and its broad range of related products and services as well as its focus on innovation should keep it in the top spot well into the future. The company has reported several quarters of triple-digit revenue growth, bringing revenue to record high levels -- $30 billion in the latest quarter. And, importantly, extremely strong margins have accompanied this growth, and Nvidia forecasts this will continue. Gross margin last quarter was 75%, and Nvidia predicts margin in the mid-70% range for the coming quarter and full year. All of this suggests that Jones -- and others who recently bought Nvidia shares -- could reap the rewards in the coming months as the Blackwell launch unfolds and over the long term too.

Think Nvidia Stock Is Expensive? This Chart Might Change Your Mind

Up more than 180% year to date and over 2,650% in the past five years, can Nvidia stock really still be cheap? Nvidia (NVDA 1.99%) has been this year's most influential stock, and it has posted huge gains in the process. The artificial intelligence (AI) leader's sales and earnings have continued to expand at an impressive pace, and the company's share price is up roughly 180% so far this year. That is just the latest leg of an incredible run that has seen the company's share price soar almost 860% since the beginning of 2023, and more than 2,650% over the last five years. Thanks to these explosive gains, the company's price-to-earnings multiple has ballooned to 66 as of this writing. Such a valuation comes with heavy expectations for growth, and it's not unreasonable to have concerns the chip company's stock price has climbed too far, too quickly. But there's another valuation metric that suggests the red-hot AI stock still has upside potential. Nvidia has the growth to back up its valuation The stock's gains don't look excessive in light of Nvidia's recent business results. For example, revenue rose 205% year over year through the first half of fiscal 2025 (the six months ended July 28, 2024) -- and earnings per share were up 285% over the same period. With expectations for its impressive growth to continue, Nvidia is trading at a forward price/earnings-to-growth (PEG) ratio of roughly 0.36. A PEG ratio of less than 1.0 is often viewed as a signal the stock is undervalued because its anticipated earnings growth is high relative to its earnings-based valuation. Data by YCharts. While there's no doubt Nvidia's sales and earnings growth will have to decelerate eventually, the company's leadership position, momentum, and PEG ratio suggest the stock still has room to run. With the launch of its next-generation Blackwell processors set for later this year, the company could have another major sales and earnings catalyst on the near horizon. Spending on GPUs to power AI applications will undoubtedly go through some cyclical shifts, but the rise of artificial intelligence is still in its early innings -- and Nvidia remains essential to that rise.

Is Nvidia a Buy? | The Motley Fool

There is a case for buying the stock after it has risen over 850%. However, doing so recklessly could spell trouble. Here is the game plan. Nvidia (NVDA 1.99%) has been the quintessential artificial intelligence (AI) stock for the past two years. The company's dominance in the market for the chips that power the data centers used for AI has launched it to unprecedented growth. The stock has appreciated more than 850% since the beginning of last year and continues marching higher, with its third-quarter earnings report right around the corner. Investors who are pondering putting fresh capital into the stock are in a precarious position. I don't blame anyone for feeling like they're late to the game, though buying along the way has only proved wise to this point. So, is Nvidia stock a buy heading into earnings? Here is what you need to know. The broader stock market historically averages an annual return of about 10%, so Nvidia's outsize move is rare and almost so dramatic that it feels like a bubble just waiting to burst. But AI has created unique circumstances around the business. Technology companies have fully embraced AI, creating arguably the most significant growth opportunity since the internet's early days in the late 1990s. Remarkably, a vital component of the AI opportunity (the chips that power it) has consolidated in Nvidia, which owns the lion's share of the market estimated at between 70% and 95%. You can see below that its revenue and earnings have increased similarly to the stock price: So, why does Nvidia keep climbing? Simply put, the stock is still reasonably priced for its anticipated growth. Consensus estimates for revenue continue to climb: Analysts anticipate Nvidia earning $2.82 per share this year, pricing the stock at 50 times earnings estimates. They also believe earnings will grow by an average of 35.6% annually over the next three to five years. Even today, the valuation is reasonable for its expected growth, with a price/earnings-to-growth ratio (PEG) of 1.4. Add in the compelling AI story, and Nvidia continues to look attractive, especially compared to stodgy, mature companies with similar earnings multiples but far less growth (I'm looking at you, Costco Wholesale). This all works as long as Nvidia keeps meeting these high expectations. But the higher it goes, the more the market expects. The company beat Wall Street's consensus revenue estimate by only 4.5% last quarter, its smallest margin since the AI boom took off. The company will report third-quarter earnings for its fiscal year 2025 in a few weeks. The danger is that Nvidia doesn't meet the market's lofty expectations. If it does come up short, it seems it would be more due to supply constraints than tepid chip demand. The company is about to transition from its Hopper architecture (the wildly popular H100 chips that it has ridden to this point) to its next-generation technology, called Blackwell. CEO Jensen Huang discussed Blackwell on the company's prior earnings call, mapping out a production ramp-up that will begin in the fourth quarter and extend into Nvidia's fiscal year 2026. Huang emphasized that Hopper demand is still strong enough that the shipments will increase in the third and fourth quarters. Meanwhile, Nvidia has reportedly sold out its Blackwell supply for the next 12 months. Arguably, the most important news from the upcoming earnings report will be updated guidance and commentary on how smoothly the company can fulfill all this demand. Nvidia does have customer concentration risk in that a small handful of big technology companies contribute a significant percentage of its sales. Still, tech leaders like Microsoft have continued to indicate they will keep buying chips in what has essentially become an AI arms race. That said, the stock could be highly volatile. Any doubts about Nvidia's growth trajectory could crush the stock, especially with how many investors could be sitting on profits from the past few years. It's tricky because it remains reasonably priced on a fundamental level, and it's hard not to like the company for the long term (five years and longer) due to its AI leadership. So, what's the solution? Investors should take a slow and steady approach, using a dollar-cost averaging strategy to buy small amounts on a schedule. That way, you'll have stock if the price continues to climb and still have cash to take advantage of better buying opportunities as they come up. Nvidia is riskier at these higher levels, but a long-term horizon and a plan can help manage it.