Nvidia (NVDA) is currently one of the most closely monitored stocks, having soared about 800% over the past two years. Investors believe that the stock has significant potential for further growth, primarily due to the company’s leading position in the rapidly expanding field of artificial intelligence (AI).
As the top player in the AI chip market, Nvidia has created a comprehensive ecosystem of associated AI products and services. This has attracted many of the world’s largest tech companies in search of these cutting-edge tools, leading to skyrocketing demand and impressive earnings. Nvidia has reported substantial revenue increases in recent quarters, with gross margins exceeding 70%.
Looking ahead to Nvidia’s fourth-quarter and full-year fiscal 2025 earnings report scheduled for February 26, several factors suggest that the stock is poised to perform well.
Firstly, the rollout of Nvidia’s latest innovation, the Blackwell architecture, appears promising, with high demand exceeding supply. The platform includes multiple customizable chips and networking options. Nvidia’s leadership has highlighted the overwhelming customer interest, with Chief Executive Jensen Huang describing the demand as “insane.” Increased visibility on supply means Nvidia anticipates surpassing its previous revenue forecasts for Blackwell.
Secondly, speculation from last month regarding a Chinese start-up, DeepSeek, which trained an AI model with Nvidia’s less expensive chips for a relatively small investment, drove some downwards pressure on Nvidia’s stock. However, the stock has begun to recover, and evidence suggests this news will not have a lasting impact. Significant players in the tech industry, including Meta and Alphabet, have reaffirmed their commitment to investing in AI, with no changes reported in their expenditure plans.
Lastly, Nvidia’s current stock valuation appears appealing, trading at approximately 31 times forward earnings estimates, a reduction from over 50 times a few weeks ago. This lower valuation may attract a wider range of investors, especially if Nvidia’s earnings report brings positive updates.
In summary, the combination of robust demand for its innovative products, resilience against negative news, and an attractive stock valuation positions Nvidia favorably as it approaches its earnings report, potentially leading to further stock appreciation.