Prediction: Nvidia Stock Will Soar After Nov. 20 for These 3 Simple Reasons

Semiconductor firm Nvidia (NVDA -3.26%) has grow to be the quintessential synthetic intelligence (AI) inventory for many buyers. Since ChatGPT launched in late 2022, Nvidia shares have surged about 950%, making it the most effective performing inventory within the S&P 500 (^GSPC -1.32%).

On Wednesday, Nov. 20, Nvidia will announce earnings for the third quarter of fiscal 2025, which led to October 2024. I anticipate the inventory to soar within the days and weeks following the report for three easy causes. Learn on to be taught extra.

1. Nvidia will probably present an encouraging replace relating to its Blackwell GPUs

Nvidia builds probably the most coveted graphics processing units (GPUs) within the computing trade, as they’ve grow to be the gold commonplace in accelerating artificial intelligence (AI) workloads. Certainly, Nvidia holds over 80% market share in AI accelerators, and Forrester Analysis just lately wrote, “With out Nvidia GPUs, fashionable AI would not be potential.”

Nvidia informed buyers final quarter that the manufacturing ramp for its next-generation Blackwell GPU would start within the fourth fiscal quarter (i.e., the present one) of 2025, which ends in January 2025. Administration will probably present an replace through the third-quarter earnings name, and shareholders have motive to anticipate excellent news. Earlier this 12 months, CEO Jensen Huang stated Blackwell could be probably the most profitable product launch in firm historical past.

Moreover, Nvidia executives just lately informed analysts that Blackwell GPUs are already “booked out 12 months.” Which means demand for the brand new processors is so sturdy that it’ll take the corporate a whole 12 months to work by its current order backlog. Consequently, Nvidia will like give encouraging steering on Nov. 20, which sould drive the inventory increased.

2. Wall Road analysts have been revising their earnings estimates increased

Nvidia has supplied encouraging third-quarter steering. Administration stated income would improve 80% to $32.5 billion (plus or minus 2%) attributable to continued demand for the present technology of GPUs, known as Hopper. Administration additionally stated non-GAAP earnings would improve 80% to $0.72 per diluted share (plus or minus 2%).

Nonetheless, Wall Road analysts have steadily raised their third-quarter earnings estimates since Nvidia gave its preliminary steering. The consensus now calls for earnings to extend 85% to $0.74 per diluted share, in keeping with LSEG. Analysts have additionally raised their worth targets, such that the consensus of $156 per share implies 10% upside from the present share worth of $142.

Wall Road analysts should not omniscient, however their perception is efficacious as a result of they’ve extra sources than retail buyers. The truth that analysts have grow to be extra optimistic forward of Nvidia’s third-quarter report is an efficient signal. It suggests very thorough analysis has uncovered indicators of sturdy demand. That would drive the inventory increased after Nov. 20.

Picture supply: Getty Photographs.

3. Nvidia’s prospects anticipate capital expenditures to extend within the coming quarters

Nvidia counts all the largest hyperscale cloud computing corporations amongst its prospects. That features Alphabet, Amazon, Meta Platforms, and Microsoft. These corporations haven’t solely invested aggressively in AI infrastructure all through 2024, but in addition anticipate capital expenditures to extend subsequent 12 months.

• Alphabet’s capital expenditures totaled $13 billion within the third quarter, most of which went to infrastructure, and administration expects the same degree of spending within the fourth quarter. However CFO Anat Ashkenazi informed analysts, “We do see a rise coming in 2025.”
• Amazon expects capital expenditures to whole about $75 billion in 2024. However CEO Andy Jassy just lately informed analysts, “I think we’ll spend extra on that in 2025.” He stated most of that capital was earmarked for its cloud computing enterprise, and he particularly talked about generative AI because the impetus.
• Meta Platforms’ capital expenditures will whole about $40 billion in 2024, most of which has been allotted to AI servers. Nonetheless, CFO Susan Li informed just lately informed analysts, “We anticipate a major acceleration in infrastructure expense progress subsequent 12 months.”
• Microsoft’s capital expenditures totaled $20 billion within the first quarter of fiscal 2025, which led to October 2024. CFO Amy Hood informed analysts, “We anticipate capital expenditures to extend on a sequential foundation given our cloud and AI demand indicators.”

Some spending mentioned above displays sturdy demand for Blackwell. Nonetheless, Nvidia additionally builds central processing units (CPUs) and networking gear. The truth is, the corporate has secured a management place in AI networking gear, in keeping with Bloomberg. So, the uptick in capital expenditures additional helps the concept Nvidia will give encouraging steering when it declares outcomes for the third quarter. That would drive the inventory increased after Nov. 20.

Nonetheless, the extra necessary takeaway is that Nvidia has a key competitive advantage in vertical integration. As a result of the corporate successfully designs complete information facilities, Nvidia can construct techniques with a superior whole price of possession, in keeping with Jensen Huang. That ought to hold the corporate forward of its opponents within the coming quarters and years. Certainly, Morgan Stanley analyst Joseph Moore just lately wrote, “The market tends to underestimate the problem of competing with Nvidia.”