Nvidia Stock: A Hot Topic Ahead of August 28 Earnings Report

Should you get on the Nvidia stock bandwagon? 3 Motley Fool contributors weigh in

Do you remember where you were during the great Nvidia Corp (NASDAQ: NVDA) dip of 2024? Nvidia, arguably the flagship stock of the artificial intelligence (AI) market rally, was trading at all-time highs in mid-July. Then it quickly stumbled by 20% when markets briefly turned fearful in early August. Fast-forward a couple of weeks, and Nvidia is already trading back near its former highs. Was the sudden sell-off a fluke, or is the Nvidia bandwagon at risk of going off the rails? Three Motley Fool contributors weighed in on Nvidia stock's recent momentum and whether shares are worth buying today. Here is what you need to know. Nvidia stock will remain the AI chip leader, but buy cautiously Will Healy: Admittedly, one cannot discuss the bull run in generative AI stocks without discussing Nvidia. As the dominant producer of AI chips, it drove massive stock gains since the fall of 2022, and investors should not expect Nvidia to be unseated as the industry leader anytime soon. Indeed, competitors such as Advanced Micro Devices and Qualcomm have moved aggressively into this market. But despite some setbacks, Nvidia continues to innovate with the upcoming Blackwell chip, and such updates should help it maintain its market leadership. However, it is also safe to say the market has priced this dominance into the stock. Since its low point of the 2022 bear market, the stock has risen by as much as 1,000%. That rapid growth may make its price-to-earnings (P/E) ratio a poor reflection of its valuation. But make no mistake; it is expensive by most measures. Its surge in the most recent bull market has taken the price-to-sales (P/S) ratio to almost 40, far above the S&P 500 average of 3. However, forecasts of triple-digit revenue growth bode well for Nvidia despite the nosebleed P/S ratio. Amid the predictions, the forward P/S ratio is 26, and the forward one-year P/S ratio falls to 19. While those ratios still make the stock pricey and vulnerable to sell-offs in the near term, they also make it less likely any pullback in Nvidia stock will be long-lasting. Hence, investors who are not highly risk averse should not only keep their Nvidia shares but also consider gradually adding shares through dollar-cost averaging (DCA). DCA investing allows investors to have a position while leaving them open to buy shares at a lower price amid any near-term pullback. Ultimately, Nvidia's leadership in AI chips has made it a pricey stock. Still, by employing a DCA approach, investors should be able to safely add to positions while leaving some cash available to buy more shares amid the likely price fluctuations. In a nutshell, that's the paradox I find myself confronting with Nvidia as of this writing. I know the company has a great lineup of blockbuster products. I know its sales are through the roof, and they'll likely keep expanding for years to come. Yet, Nvidia's stock is just so expensive. So expensive in fact that my inner-value investor keeps begging me to stop saying yes to Nvidia. Not that long ago, Nvidia's stock sported a price-to-sales (P/S) ratio below 3. Granted, that was low, as the average tech P/S ratio is typically around the high-single digits. But today, the stock's P/S ratio is an incredible 40. Not only is that far above the average for all stocks -- including tech stocks -- it's more than twice the 10-year average for Nvidia stock itself. As recently as 2022, investors could scoop up shares of Nvidia by paying 10 times sales. Those days are long gone, and that's giving me pause. Again, even on a one-year forward P/S basis, Nvidia's stock is trading at historically high levels. NVDA PS Ratio (Forward 1y) data by YCharts. Sure, the company could release guidance that blows away the current estimates and sends the stock even higher, but it could also temper expectations and leave the market disappointed. Given its current valuation, that might mean a big drop for the stock. So, I think investors who don't already have a Nvidia position should wait and see rather than jump on the Nvidia bandwagon right now. Nvidia could be vulnerable if the market falters Justin Pope: Nvidia shareholders enjoyed market-crushing returns with relatively little stress until the stock's recent stumble. I don't know if Nvidia will be higher next month than today; nobody knows. However, the recent dip teaches investors an essential lesson about volatility: It cuts in both directions. Investors can use a stock's beta value to gauge its volatility. A stock that behaves exactly like the S&P 500 will have a beta value of 1. A beta of less than 1 means the stock is less reactive to the market; it rises slower when the broader market goes up and falls slower when it goes down. A beta of more than 1 signals a more reactive stock; it will outperform the market on good days and fall faster on the market's bad days. Nvidia's beta is almost 1.7; it has crushed the market because the S&P 500 has continually chugged higher on Wall Street's excitement for AI technology. The market had a rough few days in early August, and Nvidia's stock plunged to 20% off its high. At this point, Nvidia is widely known for its leadership in AI chips, so I'm not denying the potential long-term growth opportunities. However, as my fellow Fool.com contributors have pointed out, the stock is expensive today. The reality is that Nvidia remains susceptible to aggressive selling pressure if volatility returns to the broader market. I'm no fortune teller, but it's not hard to imagine the market getting shaky over the coming months. Economic data shows a weakening economy, including a massive downward revision to America's job growth over the past year. It remains to be seen whether the Federal Reserve will begin cutting interest rates and to what extent. And if that wasn't enough, there is a presidential election just months away. The market has been remarkably resilient since early last year, but taking that for granted would be unwise. So, how should investors play this? Since nobody can predict the market or events that may impact stocks, a dollar-cost average strategy is the way to go. As Will said, slow and steady buying through the ups and downs will help investors make the most of any market volatility.

3 Reasons To Buy Nvidia Stock Before August 28 | The Motley Fool

August 28 is fast approaching. Is now the time to buy this AI leader? Did you know that just one company was responsible for more than 30% of the S&P 500's growth for the first half of this year? Take a wild guess at what company you think it is. Yes, indeed, it's Nvidia (NVDA 0.49%). The chipmaker is the tide rising all boats. It makes sense. Nvidia's technology is driving the artificial intelligence (AI) boom, enabling a technological revolution that some believe could be as transformative as the internet itself. Its massively powerful chips are a hot commodity, and that's putting it lightly. With the rest of big tech lining up at its door to get their hands on Nvidia's latest iteration, the company more than tripled its year-over-year revenue for the last three quarters. Now, all eyes are on the company's next earnings report, to be released August 28. Expectations are high. So, with the release fast approaching, is it a good time to hop on board the Nvidia train? Here are three reasons the stock still looks strong. There was some trepidation in tech as a whole when the latest round of earnings reports kicked off. Although the numbers generally showed positive growth, they fell short of what many investors hoped, with the notable exception of Meta posting monster revenue growth. A major concern was the growing capital expenditures (capex) from most of Silicon Valley, especially from companies like Alphabet and Microsoft that build and operate the gargantuan data centers largely responsible for the internet as we know it. These cloud operators spent huge sums of money in the last few years upgrading their data centers to be capable of training and running generative AI systems, and their spending is not slowing down. There's an arms race happening in Silicon Valley and no one wants to be left behind. Look at the uptick in capex for Alphabet and Microsoft over the last three years. Notice the big jump right as AI took over the news cycle in 2023? This capex growth is only continuing and even accelerating. Alphabet spent around $32 billion on capex in 2023. It's on track to spend about $50 billion this year. This is great news for Nvidia, who is on the supplier's side of many of these infrastructure orders. Yes, not all of this revenue is flowing into Nvidia's coffers, but a sizable portion is. There will continue to be a need to upgrade and expand these data centers for some time, and Nvidia will be there to meet that need. The hype around Nvidia's technology is almost entirely focused on its chips. Although this will continue to be the company's bread and butter, Nvidia is expanding its product offerings into a critical category: networking. In simple terms, data needs to travel. Traditionally, data centers used ethernet-based networks to handle this, but AI can create too much data too quickly for legacy systems to handle. There are other technologies that can be used instead of ethernet, but retrofitting data centers with this is extremely expensive. That's where Spectrum-X comes in, Nvidia's new ethernet-based networking platform for AI. Single data ports can handle data speeds up to 800 gigabits per second with low latency, and they are still backward-compatible with slower Ethernet standards. This allows certain components to be upgraded without completely overhauling the data center's network infrastructure at once. Now, Spectrum-X is not the only solution like this on the market. Broadcom already has a similar offering, for example, but I think Nvidia is likely to gain significant market share here because its solution will "play nice" with Nivida chips. The components will be optimized to work at maximum capacity when used together. Nvidia is building an ecosystem that will reward clients for sticking with its products. This could easily be a multi-billion dollar revenue stream within a year or two. Nividia committed itself to updating its flagship AI chip every year. That's quite a tall order and leaves little room for error. The company already seems to have slipped up. After a flaw was discovered in its Blackwell AI accelerator chips, the company announced there would be a delay in rolling them out. I think this is unlikely to have any significant impact on the company's bottom line. Its Hopper chips, which the Blackwells are intended to replace, are capable of meeting the current needs of its hyperscaler customers. Their sales will probably make up for any potential loss from the delayed Blackwell rollout.

Should You Get on the Nvidia Stock Bandwagon? 3 Motley Fool Contributors Weigh In | The Motley Fool

Nvidia, arguably the flagship stock of the artificial intelligence (AI) market rally, was trading at all-time highs in mid-July. Then it quickly stumbled by 20% when markets briefly turned fearful in early August. Fast-forward a couple of weeks, and Nvidia is already trading back near its former highs. Was the sudden sell-off a fluke, or is the Nvidia bandwagon at risk of going off the rails? Three Motley Fool contributors weighed in on Nvidia stock's recent momentum and whether shares are worth buying today. Here is what you need to know. Will Healy: Admittedly, one cannot discuss the bull run in generative AI stocks without discussing Nvidia. As the dominant producer of AI chips, it drove massive stock gains since the fall of 2022, and investors should not expect Nvidia to be unseated as the industry leader anytime soon. Indeed, competitors such as Advanced Micro Devices and Qualcomm have moved aggressively into this market. But despite some setbacks, Nvidia continues to innovate with the upcoming Blackwell chip, and such updates should help it maintain its market leadership. However, it is also safe to say the market has priced this dominance into the stock. Since its low point of the 2022 bear market, the stock has risen by as much as 1,000%. That rapid growth may make its price-to-earnings (P/E) ratio a poor reflection of its valuation. But make no mistake; it is expensive by most measures. Its surge in the most recent bull market has taken the price-to-sales (P/S) ratio to almost 40, far above the S&P 500 average of 3. However, forecasts of triple-digit revenue growth bode well for Nvidia despite the nosebleed P/S ratio. Amid the predictions, the forward P/S ratio is 26, and the forward one-year P/S ratio falls to 19. While those ratios still make the stock pricey and vulnerable to sell-offs in the near term, they also make it less likely any pullback in Nvidia stock will be long-lasting. Hence, investors who are not highly risk averse should not only keep their Nvidia shares but also consider gradually adding shares through dollar-cost averaging (DCA). DCA investing allows investors to have a position while leaving them open to buy shares at a lower price amid any near-term pullback. Ultimately, Nvidia's leadership in AI chips has made it a pricey stock. Still, by employing a DCA approach, investors should be able to safely add to positions while leaving some cash available to buy more shares amid the likely price fluctuations. Jake Lerch: Is Nvidia a great company? Yes. Does it have a wonderful future ahead of it? More than likely. Do I want to buy Nvidia shares right now? Not really. In a nutshell, that's the paradox I find myself confronting with Nvidia as of this writing. I know the company has a great lineup of blockbuster products. I know its sales are through the roof, and they'll likely keep expanding for years to come. Yet, Nvidia's stock is just so expensive. So expensive in fact that my inner-value investor keeps begging me to stop saying yes to Nvidia. Not that long ago, Nvidia's stock sported a price-to-sales (P/S) ratio below 3. Granted, that was low, as the average tech P/S ratio is typically around the high-single digits. But today, the stock's P/S ratio is an incredible 40. Not only is that far above the average for all stocks -- including tech stocks -- it's more than twice the 10-year average for Nvidia stock itself. As recently as 2022, investors could scoop up shares of Nvidia by paying 10 times sales. Those days are long gone, and that's giving me pause. Again, even on a one-year forward P/S basis, Nvidia's stock is trading at historically high levels. Sure, the company could release guidance that blows away the current estimates and sends the stock even higher, but it could also temper expectations and leave the market disappointed. Given its current valuation, that might mean a big drop for the stock. So, I think investors who don't already have a Nvidia position should wait and see rather than jump on the Nvidia bandwagon right now. Justin Pope: Nvidia shareholders enjoyed market-crushing returns with relatively little stress until the stock's recent stumble. I don't know if Nvidia will be higher next month than today; nobody knows. However, the recent dip teaches investors an essential lesson about volatility: It cuts in both directions. Investors can use a stock's beta value to gauge its volatility. A stock that behaves exactly like the S&P 500 will have a beta value of 1. A beta of less than 1 means the stock is less reactive to the market; it rises slower when the broader market goes up and falls slower when it goes down. A beta of more than 1 signals a more reactive stock; it will outperform the market on good days and fall faster on the market's bad days. Nvidia's beta is almost 1.7; it has crushed the market because the S&P 500 has continually chugged higher on Wall Street's excitement for AI technology. The market had a rough few days in early August, and Nvidia's stock plunged to 20% off its high. At this point, Nvidia is widely known for its leadership in AI chips, so I'm not denying the potential long-term growth opportunities. However, as my fellow Fool.com contributors have pointed out, the stock is expensive today. The reality is that Nvidia remains susceptible to aggressive selling pressure if volatility returns to the broader market. I'm no fortune teller, but it's not hard to imagine the market getting shaky over the coming months. Economic data shows a weakening economy, including a massive downward revision to America's job growth over the past year. It remains to be seen whether the Federal Reserve will begin cutting interest rates and to what extent. And if that wasn't enough, there is a presidential election just months away. The market has been remarkably resilient since early last year, but taking that for granted would be unwise. So, how should investors play this? Since nobody can predict the market or events that may impact stocks, a dollar-cost average strategy is the way to go. As Will said, slow and steady buying through the ups and downs will help investors make the most of any market volatility.

Should You Buy Nvidia Before Aug. 28? Here's What the Billionaire CEOs Are Saying. | The Motley Fool

The artificial intelligence (AI) chip superstar is set to report its results for fiscal 2025's second quarter (which ended July 28) after hours on Wednesday, Aug. 28. As with the last several quarterly reports, the results are highly anticipated. Nvidia is getting a lot more attention these days because of its leadership role in the generative AI revolution. The launch of OpenAI's ChatGPT accelerated the demand for graphics processing units (GPUs) and other more advanced components that many companies use to run complex AI models. There's a lot of speculation around the upcoming earnings report as Nvidia's results are likely to heavily influence whether the stock market, driven by the AI boom, continues its upward swing or whether it pulls back on concerns about a potential AI bubble. It's impossible to consistently predict a company's quarterly results or the market's reaction to them, but Nvidia stock watchers have one advantage: Most of its big tech peers have already reported second-quarter earnings and the CEOs of these companies provided commentary on the state of play in the emerging AI industry. For investors, there were some key insights that offer hints about Nvidia's performance in the second quarter. While there were some concerns in the stock market that AI stocks could be entering a bubble, especially when shares of Nvidia and its peers fell sharply in July through early August, it's clear that there's still a shortage of Nvidia components as companies rapidly add and expand new data centers. Speaking on Tesla's second-quarter earnings call on July 23, CEO Elon Musk not only paid Nvidia a high compliment but underscored the limited supply of its product, saying: I should preface this by saying I'm incredibly impressed by Nvidia's execution and the capability of their hardware. And what we are seeing is that the demand for Nvidia hardware is so high that it's often to difficult to get the GPUs. I guess I'm quite concerned about actually being able to get ... Nvidia GPUs and when we want them. There's little doubt from Musk's statement that the supply/demand imbalance that has made prices for Nvidia hardware soar and its sales spike persisted through the second quarter. Similarly, Meta Platforms CEO Mark Zuckerberg offered his thoughts on the evolving AI market on the July 31 earnings call, saying, "We expect that having sufficient compute capacity will be central to many of these opportunities, so we are investing meaningfully in infrastructure to support or core AI work, in content ranking and ads, as well as our generative AI and advanced research efforts." Phrases like "having sufficient compute capacity" and "investing meaningfully in (AI) infrastructure" essentially mean "buying Nvidia components." Meta CFO Susan Li also made it clear that this trend would only continue to grow as she said, "Our expectation, obviously again, is that we are going to significantly increase our investments in AI infrastructure next year," which bodes well for Nvidia. Zuckerberg elaborated on his thinking and that of many of his peers during a podcast interview with a Bloomberg reporter. He acknowledged that there was a risk of overspending on AI infrastructure, but added that the bigger risk was underinvesting, "because the downside of being behind is that you're out of position for like the most important technology for the next 10 to 15 years." Alphabet CEO Sundar Pichai echoed that sentiment, saying on the company's recent earnings call, "When we go through a curve like this, the risk of underinvesting is dramatically greater than the risk of overinvesting for us here." For Nvidia investors, the statements above should offer some reassurance that business continued to boom in the fiscal second quarter as financial reports and statements from the "Magnificent Seven" companies indicated that spending on AI infrastructure continued to soar and tech giants like Meta Platforms expect it to continue to do so into next year. Whether Nvidia stock gains on its earnings report will depend on how its results compare to analyst estimates. Currently, the average Wall Street analyst expects revenue of $25.64 billion in the quarter, up 90% from the quarter a year ago, and calls for adjusted earnings per share to jump from $1.19 in fiscal 2024's Q2 to $2.45. The CEO statements above aren't a guarantee that Nvidia will rise on its earnings report, but they do offer strong evidence that the AI chip titan has a bright future ahead of it as the big tech companies all intend to keep buying its product. That's reason enough to buy Nvidia stock before earnings, regardless of how it moves on Thursday.

Prediction: Nvidia Stock Will Soar After Aug. 28 Because of These 3 Key Factors | The Motley Fool

Nvidia's (NVDA 4.55%) steep sell-off has nearly run its course. The stock plunged 23.5% at one point, causing considerable angst for some investors. However, Nvidia has been on a roll in August, jumping almost 25%. This momentum will end anytime soon, in my view. Instead, I predict that Nvidia stock will soar after Aug. 28. And I think the surge will be due to three key factors. In Nvidia's fiscal 2025 first quarter, the company said it expected Q2 revenue of "$28.0 billion, plus or minus 2%." Wall Street analysts surveyed by LSEG believe Nvidia sandbagged a little. Their average Q2 revenue estimate is $28.6 billion. I predict Nvidia will beat its own Q2 outlook and top Wall Street's expectations when it announces its results on Aug. 28. I also think this will flow down to the bottom line, with the company exceeding the average analysts' adjusted earnings estimate of $0.64 per share. Why am I so optimistic? Both Nvidia and Wall Street have been too pessimistic about the demand for the company's graphics processing units (GPUs). In Nvidia's fiscal 2024 Q4 update, management projected fiscal 2025 Q1 revenue of $24 billion, again giving a "plus or minus 2%" caveat. The company's actual Q1 revenue was $26 billion -- 8.3% higher than its outlook. Nvidia beat the consensus Q1 earnings estimate by 9.8%. I won't be surprised if there are similar outcomes in the company's Q2 results. On a related note, I look for Nvidia to once again provide stellar guidance for the next quarter in its Q2 update. I'm even more confident about this prediction than I am that the company will deliver blowout Q2 numbers. Four reasons explain my boldness: Alphabet, Amazon, Microsoft, and Meta Platforms. All of these huge Nvidia customers indicated in their latest quarterly updates that their capital expenditures will likely increase in the coming quarters to expand their artificial intelligence (AI) infrastructure. One comment especially stood out to me in the tech giants' recent earnings calls. Alphabet CEO Sundar Pichai said, "[T]he risk of under-investing is dramatically greater than the risk of over-investing for us here." That should be music to the ears of Nvidia shareholders. And if Alphabet sees this risk of under-investing, you can bet that Amazon, Microsoft, and Meta do too. Perhaps the darkest cloud hovering over Nvidia in recent weeks is the concern that the company's launch of its new Blackwell GPUs will be significantly delayed. Any pushback in shipping these new chips will mean Nvidia's revenue won't grow as quickly as originally expected. I think the biggest issue for investors here is the sheer uncertainty. Some could be afraid of a much more serious delay than has been speculated so far. But the cure for uncertainty is clarity, something I expect Nvidia will provide in its Q2 conference call. Am I predicting there won't be any delay in shipping Blackwell chips? No. However, I suspect that Nvidia will seek to calm concerns to the best of its ability (and probably hint a lot about the pent-up demand for the new architecture). Once investors digest the news (whatever it might be), they'll quickly adjust their expectations. Most importantly, any delay will only be temporary.

Nvidia Stock: Time to Sell? | The Motley Fool

Shares of the chip company have surged about 25% from recent lows. Chipmaker Nvidia (NVDA 4.55%) has seen its stock recover nicely from a pullback in late July and early August. Shares have gone from trading at levels below $100 earlier this month to around $124, as of this writing. That's approximately a 25% gain in a very short period. With so much change so fast, investors who bought the dip or who have been holding from much lower levels earlier this year may be debating whether it might make sense to take their profits and move on. The decision about whether the stock should be sold at this level is not an easy one. The company, which creates graphic processing units (GPUs) powering the deep learning and artificial intelligence (AI) craze, trades at 74 times earnings -- a high premium. But Nvidia's underlying business fundamentals are incredible; revenue in the company's most recent quarter soared 262% year over year, and earnings per share skyrocketed 629% over the same period. Here's a closer look at both the bull and bear cases for the stock to help investors decide for themselves what they should do. Investors bullish on the stock quickly point out that the company's impressive top-line growth is likely to persist for some time. This, bulls say, is evidenced by the fact that demand for the company's flagship H200 and Blackwell chips remains ahead of supply. Nvidia chief financial officer Colette Kress even noted in the company's most recent earnings call that the company expects demand for these products to "exceed supply well into next year." Further, Nvidia bulls might point to the company's revenue guidance for its fiscal second quarter of 2025 to show how growth is continuing. Management forecast fiscal second-quarter revenue of $28 billion, a figure translating to more than a doubling of revenue and likely even faster earnings-per-share growth. Momentum like this will likely help quickly bring down Nvidia's high price-to-earnings (P/E) ratio. Fundamental to the bear case for Nvidia stock is the fact that the market is forward looking -- particularly when dealing with stocks trading at high premium valuations. This means that Wall Street may severely punish Nvidia shares if it starts seeing evidence of potential future deterioration of revenue growth rates or earnings. A simple comment from management during an earnings call about demand and supply for Nvidia's key products getting closer to equilibrium, therefore, could spook investors and cause them to no longer believe the stock deserves a valuation multiple as high as it currently commands. Further, what appears to be Nvidia's strength today -- its high profit margin -- is the same factor that makes it vulnerable. For instance, the company's gross margin in the first quarter of fiscal 2025 impressively expanded from 66.8% in the year-ago quarter to 78.9%. However, a higher-than-usual gross margin means normalization could occur in the future as demand catches up to supply and as competitors do a better job making competing products. In an environment like this, Nvidia may have to lower the price of its products, and its margins could take a hit. This could lead to not only a slowdown in earnings but possibly even a decline. Headwinds to Nvidia's margins and earnings growth (if they ever materialize) could be more than a year away. But a forward-looking market could start pricing in these risks any moment. Overall, Nvidia seems like a great company, but a risky stock at this price. Selling shares and buying something more attractive may make sense.