Nvidia Shares Will Rise After November 20 for These 3 Simple Reasons

semiconductor company Nvidia (NASDAQ:NVDA) It has become the top artificial intelligence (AI) stock for many investors. Nvidia shares have risen nearly 950% since ChatGPT launched in late 2022, making it the best-performing stock in the world. S&P 500 (SNPINDEX: ^GSPC).

Nvidia will report earnings for its third quarter of fiscal 2025, ending in October 2024, on Wednesday, November 20. I expect the stock to rise in the days and weeks following the report for three simple reasons. Read on to learn more.

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Nvidia creates the most popular graphics processing units (GPUs) in the computing industry as they have become the gold standard in accelerating artificial intelligence (AI) workloads. In fact, Nvidia has over 80% market share in AI accelerators and Forrester Research he recently wrote: “Without Nvidia GPUs, modern AI would not be possible.”

Nvidia told investors last quarter about the production ramp next generation Blackwell GPU It will begin in the fourth fiscal quarter of 2025 (i.e., the current fiscal quarter), which will end in January 2025. Management will likely provide an update during its third-quarter earnings release, and shareholders have reason to anticipate good news. Earlier this year, CEO Jensen Huang said Blackwell would be the most successful product launch in the company’s history.

Additionally, Nvidia executives recently told analysts that Blackwell GPUs are already “12 months reserved.” This means that demand for new processors is so strong that it will take a year for the company to complete its current order backlog. As a result, Nvidia will be happy to provide encouraging guidance on November 20th that could push the stock even higher.

Nvidia provided encouraging guidance for the third quarter. Management said revenue will rise 80% to $32.5 billion (plus or minus 2%) due to continued demand for current-generation GPUs, called Hoppers. Management also said non-GAAP earnings will increase 80% to $0.72 per diluted share (plus or minus 2%).

But Wall Street analysts have steadily raised their third-quarter earnings estimates since Nvidia gave its initial guidance. Consensus now calls for diluted earnings per share to rise 85% to $0.74, according to LSEG. Analysts also raised their price targets; so much so that the consensus price of $156 per share represents a 10% increase from the current share price of $142.

Wall Street analysts are not omniscient, but their insights are valuable because they have more resources than retail investors. It’s a good sign that analysts are more optimistic ahead of Nvidia’s third-quarter report. This shows that a very comprehensive survey has revealed signs of strong demand. This could push the stock higher after November 20.

A well-dressed man sits in front of a computer while holding a digital tablet. — Image source: Getty Images.

Nvidia counts the largest hyperscale cloud computing companies among its customers. This includes Alphabet, Amazon, Meta PlatformsAnd Microsoft. Not only have these companies invested aggressively in AI infrastructure through 2024, they also expect capital spending to increase next year.

Alphabet’s capital spending in the third quarter totaled $13 billion, most of it on infrastructure, and management expects a similar level of spending in the fourth quarter. But “we see an increase coming in 2025,” CFO Anat Ashkenazi told analysts.
Amazon expects capital expenditures to total around $75 billion in 2024. But CEO Andy Jassy recently told analysts: “I suspect we’ll be spending more money on this in 2025.” He said most of that capital was devoted to the cloud computing business and specifically mentioned generative AI as a driving force.
Meta Platforms’ capital expenditures will total approximately $40 billion in 2024, most of which will be allocated to AI servers. But CFO Susan Li recently told analysts: “We expect a significant acceleration in infrastructure spending growth next year.”
Microsoft’s capital expenditures totaled $20 billion in the first quarter of fiscal 2025, which ends in October 2024. “We expect capital spending to increase sequentially given our cloud and AI demand signals,” CFO Amy Hood told analysts.

Some of the expenses discussed above reflect strong demand for Blackwell. But Nvidia also produces central processing units (CPUs) and networking equipment. In fact, the company has secured a leadership position in AI networking hardware, according to Bloomberg. So the increase in capital spending further supports the idea that Nvidia will provide encouraging guidance when announcing third-quarter results. This could push the stock higher after November 20.

But the more important takeaway is that Nvidia has a significant competitive advantage in vertical integration. Because the company effectively designs entire data centers, Nvidia is able to create systems with a superior total cost of ownership, according to Jensen Huang. This will keep the company ahead of its competitors in the coming quarters and years. Actually, Morgan Stanley analyst Joseph Moore recently wrote: “The market tends to underestimate the difficulty of competing with Nvidia.”

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John Mackey, former CEO of Whole Foods Market, a subsidiary of Amazon, is a board member of The Motley Fool. Suzanne Frey, an executive at Alphabet, is a board member of The Motley Fool. Randi Zuckerberg, former market development director and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a board member of The Motley Fool. Trevor Jennewine It has positions in Amazon and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a feature disclosure policy.

Prediction: Nvidia Shares Will Rise After November 20 for These 3 Simple Reasons originally published by The Motley Fool

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