Nvidia’s Share Price Patterns Suggest Potential Growth Ahead

History doesn’t typically repeat itself, but it often resonates. Therefore, past market trends can serve as indicators for potential future movements.

Currently, a pattern is emerging with Nvidia (NASDAQ: NVDA): the company has experienced substantial price increases during May for the last two years. The current setup appears similar to the prior years before those price jumps, possibly signaling a good time for investors to buy.

2024 Valuation Analysis

Nvidia produces graphics processing units (GPUs), which excel in tasks requiring considerable parallel processing power. These include applications like high-resolution video game graphics and artificial intelligence (AI) model training.

In early 2023, demand for GPUs surged as companies rushed to build data centers for AI software, resulting in a significant spike in Nvidia’s stock price by late May, following a positive Q1 fiscal 2024 report and strong guidance for Q2.

NVDA data by YCharts.

By May 2024, despite Nvidia reporting impressive results over the previous year, investor uncertainty about sustaining growth rates emerged. Nevertheless, the company released another strong fiscal Q1 report that positively impacted the stock price.

NVDA data by YCharts.

As we look ahead to May 2025, investor concerns about Nvidia’s ability to maintain its growth trajectory are resurfacing. Factors impacting this include tariffs imposed during the Trump administration and anxieties regarding a potential U.S. economic slowdown. The stock is currently trading below its all-time highs at a forward price-to-earnings (P/E) ratio around 26.

NVDA data by YCharts.

This current forward P/E ratio closely mirrors those from the past two Mays. Historically, following the publication of favorable Q1 results and an optimistic outlook, Nvidia’s stock typically trades between the mid-30s and mid-40s for its P/E ratio.

NVDA PE Ratio (Forward) data by YCharts. PE Ratio = price-to-earnings ratio.

Given the similarities to previous years, there is reasonable optimism that Nvidia’s stock price will see a significant increase following its fiscal Q1 report on May 28, assuming no unexpected negative developments arise.

Impact of Recent Write-Offs

This year’s fiscal Q1 presented challenges for Nvidia, particularly due to U.S. government restrictions on exporting high-end chips to China. These revised export rules have necessitated a $5.5 billion writedown, which is expected to influence Q1 earnings. These restrictions may also dampen future demand for Nvidia’s products.

Despite these challenges, AI hyperscalers have reassured investors through their recent Q1 reports that capital expenditure plans for data centers, predominantly devoted to AI, remain intact. Their intentions to invest tens of billions in cloud infrastructure development should provide Nvidia with sufficient growth potential to validate its current valuation.

Nvidia projects that annual data center capital expenditures will rise to $1 trillion by 2028, up from approximately $400 billion in 2024. If this prediction materializes, substantial long-term upside may remain for Nvidia’s stock.

In the short term, Nvidia’s stock could be positioned for considerable movement post-earnings report on May 28. With this context, acquiring shares at their current valuation could prove to be a profitable strategy.

Conclusion

Investors often feel they have missed out on opportunities with top-performing stocks. However, this might open up a unique chance for current buyers. Nvidia merits attention, particularly if solid performance reports continue.

Ever feel like you’ve missed the boat on investing in successful stocks? Consider the numbers below:

• Nvidia: If you invested $1,000 when we first recommended it in 2009, you would have $302,503.
• Apple: An investment of $1,000 made in 2008 would now be worth $37,640.
• Netflix: A $1,000 investment from 2004 would have grown to $614,911.

Currently, we are alerting investors to noteworthy opportunities that may not arise again soon.

Keithen Drury has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.