Should You Consider Buying Nvidia Stock Before Nov. 20?

The stock of Nvidia continues to show surprising strength, but is the company's growth starting to slow down?

Artificial intelligence (AI) continues to gain traction, leading to optimism in the market. Recently, a strong U.S. economy and solid quarterly results from various AI-focused companies lifted the Nasdaq Composite to new record highs. However, this rapid advancement has left some investors questioning whether the market's growth has been too rapid.

Nvidia (NVDA) has emerged as a leader in the generative AI sector. The company is set to release its fiscal 2025 third-quarter earnings report in just a few weeks, and Wall Street analysts are eager to see what insights this report will provide regarding AI adoption. Since early last year, Nvidia's sales have skyrocketed, pushing the stock price up by an astonishing 833%. Currently, it is also just under 5% off its all-time high reached recently.

With so much depending on Nvidia's upcoming earnings report, many shareholders are left to wonder if the stock can maintain its upward trend. Is now the right time to buy shares before the financial report on November 20? The good news is that emerging data offers insights that may help answer this question.

Good News Amid Uncertainty

Nvidia’s remarkable performances over the last couple of years can be largely attributed to its graphics processing units (GPUs), which are particularly effective for the unique computational demands of generative AI as well as cloud computing. The demands of AI limit the development of top-tier models to the major tech and cloud companies, many of which are customers of Nvidia. Recent comments from these tech giants during their earnings reports provide valuable hints about the current state of AI development.

Microsoft reported a significant investment in its AI initiatives during its first fiscal quarter of 2025, with capital expenditures reaching $20 billion, primarily aimed at enhancing cloud and AI capabilities. CFO Amy Hood indicated that this expenditure trend would continue as the demand for cloud and AI innovations grows.

Alphabet also shared its plans in the third quarter, with CEO Sundar Pichai emphasizing that meaningful investments are needed to capitalize on AI opportunities. Alphabet's capital expenditures for the quarter reached $13 billion, hinting that substantial increases would continue into 2025 focusing on AI investments.

Amazon is on a similar path. CEO Andy Jassy described AI as a potentially once-in-a-lifetime opportunity, with expectations that the company will spend approximately $75 billion in capital expenditures this year, heavily focused on AI and cloud computing infrastructure. Amazon also plans to introduce "100 new cloud infrastructure and AI capabilities" at its upcoming AWS re:Invent event.

Meta Platforms may not be a cloud provider, but its social media applications gather vast amounts of user data every day. The company adjusted its full-year capex forecast to about $39 billion, with intentions to significantly grow expenditures for AI research and development in 2025.

Importance of Capital Expenditure Trends

The clear trend is a rise in capital expenditures (capex) to meet the surging demand for AI. A significant portion of these investments will be directed toward the data centers and servers essential for cloud computing, which is where most generative AI services exist. As a prominent supplier of data center GPUs, Nvidia is likely to benefit significantly from this spending.

While Nvidia typically does not disclose its largest customers, analysts from Bloomberg and Barclays Research have determined that the company’s top four clients account for approximately 40% of its sales:

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

These companies have made their plans for high capital expenditures clear, emphasizing investments in infrastructure to support their AI and cloud computing goals. Being the leading provider of GPUs for data centers, Nvidia stands to gain a substantial share of this market.

Important Dates Ahead

Nvidia will release its next quarterly earnings on November 20. After experiencing over 100% year-over-year growth for five consecutive quarters, Nvidia is trying to manage market expectations this time, projecting a revenue growth of around 79%. While this would mark a deceleration, it would still represent impressive growth.

Short-term investors might find it challenging to reap quick profits, as the stock's reaction to the earnings report is uncertain—even if Nvidia surpasses expectations. Historical data shows that short-term predictions can often miss the mark; for instance, this past summer, Nvidia saw its stock drop nearly 27% over concerns regarding delays in its next-generation AI processors, only to rebound strongly afterward. This volatility is a known risk for investors in Nvidia.

For long-term investors rather than those looking for short-term gains, Nvidia remains an attractive option to benefit from the ongoing AI transformation. Trading at roughly 32 times next year’s anticipated earnings, the stock still appears reasonably priced. While it’s unclear how the stock will behave leading up to November 20, investors who choose to purchase Nvidia stock and hold it for three to five years could find themselves very pleased with that decision.

Nvidia, AI, Investments