Nvidia Stock Poised for Potential Surge Ahead of August 28 Earnings Report

Prediction: Nvidia Stock Is Going to Soar After Aug. 28 | The Motley Fool

Nvidia (NVDA 6.53%) is a $2.6 trillion company, and it currently represents 5.8% of the value of the S&P 500 index. In June, Nvidia stock was sitting on a 150% year-to-date gain, which was responsible for one-third of the entire return in the S&P 500. Both Nvidia and the index have been in a slump since mid-July, but there is a seismic event coming up on Aug. 28 that could reverse both of their fortunes. It's the date Nvidia reports its financial results for the fiscal 2025 second quarter (ended July 31), and if past quarters are any indication, it could be an absolute blowout. Nvidia designs the most powerful data center chips for processing artificial intelligence (AI) workloads, and demand from some of the world's largest tech giants continues to outstrip supply. Therefore, investors are waiting on the edge of their seats for the company's latest sales results; here's how I predict Nvidia stock will react after they hit the wires. Nvidia's graphics processors (GPUs) for data centers set the benchmark for AI development. GPUs are designed for parallel processing, which means they can complete multiple tasks simultaneously. They can handle high throughput and typically have a significant amount of built-in memory, which makes them ideal for processing large volumes of data. That is key when it comes to training AI models and performing AI inference. AI applications could drive a productivity boom across the global economy worth trillions of dollars in the coming decade, according to many Wall Street forecasts. As a result, data center operators are replacing much of their traditional CPU-based infrastructure with GPUs to meet demand from AI developers. Nvidia's flagship H100 GPU has been the go-to choice since last year, but the company is racing to beat its own benchmarks when it comes to performance. Nvidia's new H200 can perform AI inference at almost twice the speed of the H100 while consuming half the amount of energy. Then there is the GB200, which is based on Nvidia's new Blackwell architecture, and it could perform AI inference at a whopping 5 times the pace of the H100. Blackwell-based chips will start shipping to customers at scale in 2025. Nvidia has a tight grip on the data center GPU market. It had an estimated 98% market share in 2023, and even though that will shrink this year as viable competition comes online from other chipmakers like Advanced Micro Devices, demand is likely to continue outstripping supply. Nvidia generated a record $26 billion in revenue during the fiscal 2025 first quarter (ended April 28), which was a 262% increase from the year-ago period. It blew Wall Street's $24.6 billion projection right out of the water. The result included $22.6 billion in data center revenue alone, which represented 427% growth on the back of surging GPU demand. Nvidia also delivered an incredible result at the bottom line, with $6.12 in earnings per share. It was a 461% increase and it came in comfortably above the Street's $5.59 prediction. Wall Street also underestimated Nvidia's guidance. The company told investors it expects to show $28 billion in second-quarter revenue when it reports on Aug. 28, whereas the Street pegged that number at $26.6 billion. Analysts have since played catch-up, and their consensus estimate has been revised higher to $28.5 billion, which signals Nvidia's own forecast might even be too conservative. We'll know for sure in two weeks. While the performance of a stock on any given day is mostly just noise, here's how Nvidia reacted to each of its last two earnings reports: But the longer-term trend is crystal clear. Nvidia was a $360 billion company at the beginning of 2023, right before AI fever swept Wall Street, and its stock has surged more than 700% since then. In other words, a string of incredible earnings reports has created sustained upward momentum in its stock price, and I think Q2 will contribute to that trend. If Nvidia exceeds Wall Street's sales estimate, its stock could jump by at least 9% the following day, as it did after its Q1 results. The response could be even more positive given the recent dip in the stock. However, investors should be more focused on the longer term. If Nvidia manages to deliver $3.75 in earnings per share in fiscal 2026 (which starts in February 2025) as Wall Street expects, its stock would have to soar by 108% over the next 18 months just to maintain its current price-to-earnings (P/E) ratio of 58.2. Granted, that P/E ratio is quite expensive relative to the Nasdaq-100, which trades at a P/E ratio of 29.6, but it might be temporarily justifiable given Nvidia's lightning-paced growth. I say "temporarily" because this dream run will come to an end, eventually. Competition is growing in the market for AI data center chips, and as is the case with every technology, the further development of AI past a certain point will yield diminishing returns, which will shrink demand. It's difficult to predict exactly when that will happen, but investors should be wary of holding the stock blindly in the hope of earning the same returns Nvidia delivered in the past.

Prediction: You'll Likely Wish You Bought Nvidia Stock Hand Over Fist Before Aug. 28 | The Motley Fool

The graphics card specialist looks all set to spring a surprise later this month. Though Nvidia (NVDA 1.67%) has been one of the hottest stocks on the market in 2024 with terrific gains of 118% as of this writing, the recent share price action suggests that investor confidence in the stock has become a bit shaky. After all, shares of Nvidia retreated more than 20% since hitting a 52-week high on June 20. The stock's retreat can be attributed to multiple factors such as the growing fears of a recession in the U.S. following a weaker-than-expected jobs report, doubts about Nvidia's ability to sustain its outstanding growth, and concerns if artificial intelligence (AI) could indeed turn out to be a major catalyst for tech giants that are pouring huge amounts of money into this technology. However, a closer look at the monthly sales figures of one of Nvidia's key manufacturing partners tells us that the graphics card specialist could soon regain investor confidence and start soaring once again. Taiwan Semiconductor Manufacturing (TSM -1.38%), popularly known as TSMC, is a semiconductor foundry that manufactures chips for fabless chipmakers such as Nvidia. A fabless chipmaker designs and sells semiconductors, while the actual manufacturing is done by foundries such as TSMC. Nvidia is one of TSMC's key clients, accounting for 11% of its revenue in 2023. TSMC has been working with Nvidia to help it produce more AI chips and reduce the long waiting times. More specifically, TSMC plans to increase its advanced chip packaging capacity at an annual rate of 60% through 2026 to meet the robust demand for high-performance chips needed in AI data centers. TSMC's revenue in July increased 45% from a year ago to almost 257 billion New Taiwan dollars (or $7.9 billion in U.S. dollar terms). TSMC's monthly revenue increased at a much faster pace than consensus expectations of 37% growth in Q3 revenue, suggesting that it could well be on track to deliver better-than-expected results next time. But at the same time, TSMC's surging revenue growth over the past three months is also an indicator of a potentially strong showing from Nvidia when it releases its fiscal 2025 second-quarter results (for the three months ended July 28) on Aug. 28. TSMC's revenue increased 30% in May, followed by a 33% increase in June, and an even better showing last month. Analysts are anticipating Nvidia to deliver $28.5 billion in revenue for fiscal Q2. That would be a 111% increase from the same period last year. For comparison, Nvidia's revenue in fiscal Q1, which ended in April, was up a whopping 262% year over year to $26 billion. TSMC's revenue in the first quarter of calendar 2023 was up 13% year over year, followed by 33% year-over-year growth in Q2. And, as TSMC's revenue growth has continued to accelerate, there is a good chance that Nvidia has been able to procure more chips from the foundry giant. This suggests that Nvidia may have been able to fulfill more orders from clients. The company pointed out on its May earnings conference call that the demand for its current generation Hopper chips has been increasing, with the H200 AI chip witnessing stronger demand than supply. Additionally, Nvidia says that its next-generation Blackwell AI chips are likely to remain supply constrained well into 2025. So, if TSMC is indeed increasing the output of its chips and is able to ramp up production for clients such as Nvidia, the possibility of Nvidia delivering better-than-expected numbers later this month cannot be ruled out. Savvy investors would do well to buy Nvidia stock before it steps on the gas. Nvidia's recent pullback has made the stock more attractive than before. It is now trading at 61 times trailing earnings. Though that's higher than the U.S. technology sector's average earnings multiple of 41, Nvidia is cheaper than its five-year average trailing earnings multiple of 71. What's more, Nvidia's forward earnings multiple of 40 points toward a big improvement in its bottom line and is in line with the U.S. technology sector's average. Analysts are expecting Nvidia's earnings to more than double in the current fiscal year to $2.72 per share from $1.30 per share in the previous fiscal year, followed by another solid jump of almost 40% in the next fiscal year to $3.75 per share. The chipmaker, however, could clock faster earnings growth if it can indeed help fulfill more orders with the help of foundry partners such as TSMC. That's why savvy investors looking to add an AI stock to their portfolios should consider Nvidia. It's never too late to buy a high-quality investment, but now could be a prime time to look at Nvidia as it prepares its earnings report.

2 Reasons to Buy Nvidia Stock Before Aug. 28 | The Motley Fool

Artificial intelligence (AI) is the single biggest leap in technology since the internet -- or so say its biggest believers. Its effect on the market has been enormous. Led by the poster child of the AI revolution, Nvidia (NVDA 1.67%), AI stocks went on a tear over the last few years that made a lot of people a lot of money. The last month or so hasn't been so kind; the Nasdaq Composite is down more than 10% since its peak in early July. The majority of big tech players released their earnings for Q2 2024, and although there was a lot of positive news -- Meta Platforms posted 22% year-over-year revenue growth for the quarter -- investors were somewhat spooked by the larger-than-expected spends the companies are planning to make on AI infrastructure. This, in combination with broader market fears -- here's hoping the Federal Reserve can nail that "soft landing" -- hit Nvidia hard. Its stock is down over 22% since July 10. But you know what? I think this is great news. It's a buying opportunity for those who still believe in the stock, and I do. With the company set to release its Q2 numbers on Aug. 28, here are two reasons to buy before it does. During the latest round of earnings calls, CEOs from the big tech players fueling Nvidia's monster returns fielded questions about their companies' expectations for future capital expenditures (capex), specifically those relating to AI. Alphabet, for instance, spent about $32.3 billion in capex in 2023. This year, the company could hit $50 billion. That's a massive increase, and it's not alone. Check out this chart showing the net change in capital expenditures from Alphabet et al. over the past year. META Capital Expenditures (Quarterly) data by YCharts If there is an end to massive spending on AI infrastructure, it is some ways off. AI is too big an opportunity, and no company wants to be left behind. As Alphabet CEO Sundar Pichai put it in the earnings call, "The risk of underinvesting is dramatically greater than the risk of overinvesting for us here." Although there is more to AI infrastructure than the chips Nvidia provides, they are arguably the most essential part, and Nvidia is likely to be flooded with cash for some time. Of course, Nvidia must work to maintain its market share, but it is in a strong position to do so. But can AI deliver the kind of real-world value that justifies its enormous cost? I think the jury is still out, but Meta's recent earnings make me more confident. As I mentioned earlier, Meta posted 22% revenue growth from a year ago and a whopping 73% jump in earnings per share. During its recent earnings call, CEO Mark Zuckerberg attributed this jump in part to AI. The company used AI to improve its content algorithm, which led to more engagement. This translated into more use, which meant more advertising revenue. Zuckerberg spoke of his plans to have AI craft entire marketing campaigns -- both strategy and the creative assets themselves -- for advertisers. This could open up a whole new revenue stream for the company. The idea is just one example of the powerful, revenue-generating promise of AI. The more evidence of real-world value, the more companies will be willing to continue to spend on AI, and that is good news for Nvidia.

Is Nvidia Stock Going to $120? 1 Wall Street Analyst Thinks So. | The Motley Fool

It's been a wild couple of weeks for Nvidia (NVDA 6.53%). Shares of the artificial intelligence (AI) chip leader have moved by 5% in seemingly every session as investors struggle to value the dominant data center GPU maker. Nvidia shares soared since the start of 2023 as its hardware is fueling the generative AI boom. Now there are legitimate questions about the economy's strength, the potential influence of AI, and how quickly Nvidia can grow. Consequently, the stock has fallen 23% since the Nasdaq Composite peaked a month ago. However, one analyst sees the sell-off as a buying opportunity. Last week, New Street Research upgraded its rating on Nvidia from neutral in response to the sell-off. The research firm noted the stock had fallen 26% from its June peak, underperforming peers that are also competing in data center AI. It sees the sell-off as a buying opportunity and gave the AI stock a price target of $120, implying upside potential of 15%. Nvidia shares have pulled back as the AI rally became overheated, but there's a good argument that the stock is oversold. The brief scare over a potential economic recession seems to have passed for now. Nvidia's momentum remains strong, though the company may be experiencing a delay in its new Blackwell platform. The latest update from Taiwan Semiconductor Corporation, the world's biggest chip manufacturer, showed July revenue that increased 45% from a year ago and 24% from June, a sign that the last month of Nvidia's second quarter was strong in the semiconductor industry and for AI chips. Nvidia will report second-quarter earnings at the month's end and looks set to deliver another round of strong growth. After the recent pullback, the stock looks more reasonable at a forward price-to-earnings ratio of 40. If market sentiment improves and Nvidia's second-quarter numbers are strong, the stock could be significantly higher by the month's end. Over the longer term, the stock should continue to outperform if it can retain its AI leadership.