2 Incredibly Simple Reasons to Buy Nvidia Stock Before November 20

Nvidia‘s (NVDA 4.07%) The artificial intelligence (AI)-supported rise continued in 2024. Cloud service providers, governments and anyone else looking to jump on the AI ​​bandwagon are lining up to buy the company’s graphics processing units (GPUs) to train and deploy AI models.

Shares of the semiconductor industry increased by 173% this year. As we take a closer look at the latest developments in the AI ​​ecosystem, we will see that the stock’s rise will continue, with the company’s upcoming fiscal 2025 third-quarter earnings serving as a catalyst. The chipmaker will release its third-quarter financial results (for the three months ending October 27) on November 20.

Let’s see why buying this high-flying plane might be a good idea. artificial intelligence stock before their earnings were announced.

Nvidia crushes the competition

Nvidia competes in the AI ​​chip market Advanced Micro Devices (NASDAQ:AMD) And Intel (NASDAQ: INTC). But AMD’s latest results show it’s nowhere near Nvidia in the AI ​​graphics processing units (GPUs) market. AMD’s data center business grew 122% year over year to $3.5 billion in the third quarter of 2024. By comparison, Nvidia’s data center revenue was much higher at $26.3 billion in the second quarter of fiscal 2025 (ended in July).

What’s important to note here is that despite its large size, Nvidia’s data center revenue was up a stunning 154% year over year in the last reported quarter. Moreover, AMD sells both server GPUs and central processing units (CPUs), but has not achieved as much traction in the AI ​​chip market as Nvidia has.

Meanwhile, Intel is falling further behind. It initially expected to sell $500 million worth of AI GPUs this year. But in the latest version earnings conference callIntel management noted that “general adoption of Gaudi has been slower than we expected.” As a result, Intel will not be able to reach its $500 million revenue target this year, which suggests that it will not cause much trouble for Nvidia.

On the other hand, AMD expects AI GPU sales to be $5 billion in 2024. These figures are much lower than the value of the AI ​​GPUs Nvidia sold in the quarter alone, and confirm that Nvidia remains the dominant force in the AI ​​chip market. After all, with its current revenue rate, Nvidia can finish this year With $84 billion in AI GPU revenue.

If you add up potential AI GPU revenue estimates from Nvidia, AMD, and Intel, it turns out that Nvidia currently controls over 90% of this market. More importantly, its rivals have failed to make significant progress in the AI ​​chip market after two years. Therefore, Nvidia remains in a great position to cut much of the spending on AI GPUs.

The data center AI accelerator market is predicted to reach $500 billion in annual revenue by 2028, according to AMD’s forecasts, and Nvidia’s rock-solid market share means it’s first in line to make the most of this market.

Big tech companies will invest more in artificial intelligence infrastructure

Another important theme emerging from the latest earnings reports of major tech players is: Meta Platforms (NASDAQ:META) And Microsoft (NASDAQ:MSFT) They will continue to spend big money building artificial intelligence infrastructure.

Meta Platforms, for example, raised the lower end of its capital expenditure (capex) forecasts for 2024. It now expects to spend $38 billion to $40 billion in capital expenditures this year, compared to a previous range of $37 billion to $40 billion. . But the company added that it expects “a significant acceleration in growth in infrastructure spending next year.”

Meta CEO Mark Zuckerberg points out that the company’s artificial intelligence efforts will require more investment for the company to make the most of this technology. In his last earnings conference call, Zuckerberg stated:

First, it is clear that there are many new opportunities to use new AI developments to accelerate our core business, which should generate a strong return on investment over the next few years. Therefore, I think we need to invest more there.

Second, our AI investments continue to require significant infrastructure, and I expect to continue to invest significantly there as well.

Microsoft is also spending a ton of money on AI infrastructure. In the first quarter of fiscal 2025, capex was $20 billion; This was a significant jump over the $11.2 billion it spent in the same quarter last year. It is worth noting that Microsoft spent $55.7 billion on capital expenditures in fiscal 2024, and the company’s first quarter fiscal 2025 spending marks a significant acceleration on this front.

Actually Microsoft management says so He expects “capital spending to increase sequentially given our cloud and AI demand signals.” All of this tells us that demand for AI hardware will remain strong and help Nvidia continue the impressive growth it’s been seeing.

Yahoo! Consensus estimates compiled by Finance predict that Nvidia will generate $32.9 billion in revenue in the third quarter when it releases its quarterly report later this month. The company’s earnings are expected to double from the previous year to $0.74 per share. The chipmaker targeted $32.5 billion in revenue at the midpoint when it reported its previous results in August; This means analysts expect stronger growth from the company.

Continued strength in AI hardware demand capacity expansion efforts A study from Nvidia’s manufacturing partner shows that it may exceed consensus estimates; This is a scenario where high-flying AI stocks could gain a good advantage. Considering Nvidia is currently trading at an attractive 35x price forward earnings Compared to the US tech sector’s average of 45, investors have another solid reason to buy this stock before it reports quarterly results on November 20.