Nvidia (Nasdaq: NVDA) The stock has been unstoppable over the past few years, thanks to the company's key role in the world of artificial intelligence (AI). The tech giant makes graphics processing units (GPUs) that support critical AI tasks, such as training and inference on large language models. These models then go on to do their job of completing complex tasks. Nvidia owns 80% of the AI chip market because its GPUs are the fastest ever, and that translates into massive earnings performance.
The company's quarterly earnings have topped analyst estimates in at least the past four quarters. Revenue and net income have soared into the triple and even quadruple digits in recent quarters — into the billions of dollars. So it's no surprise that the stock is up more than 200% over the past year.
Given all this, should you rush out and buy Nvidia stock before its earnings report on May 22?
Nvidia's move from gaming to artificial intelligence
First, here's a look at Nvidia's earnings trajectory so far. A few years ago, the company generated most of its revenue from the video game industry, where the GPU brought games to life on the screen. But the GPU's ability to handle multiple tasks simultaneously made it clear that this chip could be a big win in other industries as well. Nvidia created CUDA, a parallel computing platform that brings the GPU to general computing — and that's what opened the door to artificial intelligence.
Since then, Nvidia has gradually increased revenue from its data center business — which includes its AI offerings — and this now represents the company's largest source of growth and revenue. Last quarter, data center revenues rose more than 400% year over year to reach a record high of $18.4 billion. This is for a total revenue of about $22 billion (also a record) and much more than the gaming revenue of $2.9 billion.
In addition to graphics processing units, Nvidia offers a wide range of products and services, including a growing cloud software platform that simplifies the development of the company's AI applications. Potential customers can access all of this through the world's major cloud providers – so it's easy for businesses to learn about what Nvidia has to offer. And start.
Nvidia versus the competition
It is true that Nvidia is facing increasing competition from competitors, e.g Intel And Advanced micro devices, both of which announced new high-performance chipsets recently. Intel even said that its latest innovation – the Gaudi 3 AI accelerator – surpasses the performance and price of Nvidia's H100.
The partners also team up with Nvidia. For example, AmazonAmazon Web Services (AWS) sells Nvidia products And Developed internally Training and inference chips.
These players will likely gain some market share, but Nvidia still has what it takes to dominate the market and keep those looking for a premium segment coming back. This is due to the company's first-to-market advantage, coupled with its reputation for high performance and continuous innovation.
Later this year, the company plans to release its Blackwell architecture, including six new technologies – this includes its most powerful chip yet. Although competition may become tougher, it is unlikely to unseat Nvidia.
Now let's take a look at what to expect from the company's earnings report next week. Earlier, Nvidia expected revenues for the first quarter of 2025 to be about $24 billion, representing an increase of more than 200% year-on-year. The GAAP gross margin forecast of 76.3% also shows a significant jump from the prior period, when GAAP gross margin was 64.6%.
One factor that could represent a headwind is restrictions imposed by the US government on sales of artificial intelligence chips to China. Nvidia has designed a new chip to fit government specifications, but it's not yet clear whether this product will take off.
Should you buy Nvidia?
Let's get back to our question: Should you buy Nvidia before its May 22 earnings report? not necessarily.
As a long-term investor, you won't gain or lose much if Nvidia shares move even by double digits after the report. That kind of move in Nvidia stock's performance won't play out over five or 10 years — your minimum holding period. This is great because it takes the pressure off before events like earnings reports and means you don't have to rush into making an investment decision.
However, I'm optimistic about Nvidia's future, thanks to its strong market position, focus on innovation, and the fact that the overall AI story is still in its early days. It's a great idea to buy Nvidia – before or after May 22nd.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Adria Cimino He has jobs at Amazon. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon, and Nvidia. The Motley Fool recommends Intel and recommends the following options: long January 2025 $45 calls on Intel and short May 2024 $47 calls on Intel. The Motley Fool has Disclosure policy.
Should you buy Nvidia stock before May 22? Originally published by The Motley Fool