The S&P 500 is rallying toward a 25% increase this year, and many growth stocks have greatly contributed to the gain. The one that stands out, though, is Nvidia(NASDAQ: NVDA). It's become a stock market star thanks to its leadership in the artificial intelligence (AI) chip market, holding about 80% share. AI customers have been flocking to Nvidia for its AI chips and related products and services, and this has helped earnings soar in the triple digits quarter after quarter.
And speaking of quarterly performance, investors now are turning to one particular event set to unfold in just a couple of days. Nvidia plans to report fiscal 2025 third-quarter earnings on Nov. 20. We might be optimistic since the company has a track record of surpassing expectations and has recently spoken of "insane" demand for its products. Still, Nvidia already has climbed nearly 200% this year. And it's important to remember that this particular quarter may represent a transition for the chip designer, as it prepares to launch its new Blackwell architecture.
Now the question is: Will Nvidia soar after Nov. 20? Evidence is piling up, and it's pointing to one particular outcome. Let's find out more.
Image source: Getty Images.
Nvidia's top GPUs
So, first, let's consider Nvidia's story so far. The company's graphics processing units (GPUs) are considered the best around, and this explains why customers rush to get in on them -- and don't mind paying a higher price or waiting to get their hands on the latest version. Nvidia also sells a broad range of products and services so customers can go to the company for all of their AI needs. Even better, Nvidia is present across all public clouds, making it easy and convenient to access these offerings.
All of this has helped Nvidia report record revenue in recent quarters, driven by the data center business. In the most recent period, data center accounted for 87% of the company's total revenue of $30 billion. And that level of revenue surpasses full-year revenue as recently as two years ago. Importantly, Nvidia is highly profitable on its sales, with gross margin topping 70%.
As mentioned, the upcoming report represents a bit of a transition for this tech giant. In the third quarter, Nvidia was preparing for the production ramp of Blackwell -- set to happen in the fourth quarter. And the company has grown revenue so much in recent years that, for the third quarter, it predicts a double-digit increase year over year -- instead of the triple-digit increases we've seen in past quarters.
Some investors may see a lower growth figure as a disappointment or worry about possible headwinds that could arise during a new product rollout. These elements may weigh on Nvidia stock after Nov. 20. But more evidence points to positive stock performance following the earnings report. As mentioned, Nvidia has established a solid track record of earnings growth and has surpassed expectations for at least the past four quarters.
Comments from Jensen Huang, Larry Ellison, and Elon Musk
Nvidia chief executive officer Jensen Huang has spoken repeatedly in recent weeks about high demand for the new Blackwell platform. He even called the demand "insane" during an interview with CNBC. Comments from customers support this idea. Oracle co-found Larry Ellison says he and Tesla chief Elon Musk met with Huang and "begged" him for more GPUs for their projects. Finally, Taiwan Semiconductor Manufacturing, the company that manufactures Nvidia's chips, reported double-digit revenue growth for this latest quarter and spoke of high demand from its customers.
All of this suggests Nvidia may have a good deal of positive news to report on Nov. 20, and that may help the stock soar in the weeks ahead.
That said, it's important to remember that even amid positive news, stocks sometimes fall. Investors may consider the shares have gained quite a bit already and the good news is priced in, for example. So, it's impossible to predict short-term stock performance with 100% accuracy.
What does all of this mean for Nvidia and for you as an investor? As seen here, there are plenty of reasons to be optimistic about the report ahead, and it's possible the stock will rise after Nov. 20. But even if it doesn't, that's OK. Nvidia stock still has plenty of room to run over time, thanks to the company's market leadership, financial strength, and ongoing innovation. And that makes it a fantastic AI stock to buy and hold onto for the long term.
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Adria Cimino has positions in Oracle and Tesla. The Motley Fool has positions in and recommends Nvidia, Oracle, Taiwan Semiconductor Manufacturing, and Tesla. The Motley Fool has a disclosure policy.
