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Is it the Right Time to Invest in Nvidia’s (NVDA) Recent Rally with Earnings Approaching?

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Nvidia (NVDA) has been a front-runner in the recent surge of chip stocks, nearing the $500 per share mark and approaching 52-week highs. The momentum of chip leaders has been further strengthened by today’s Consumer Price Index (CPI) data, which exceeded expectations. The flat month-over-month CPI and a 3.2% year-over-year increase, down from September’s spike, indicate easing inflation, which is favorable for consumer spending on non-essential items like electronics.

Recent Performance & Earnings Date

Nvidia’s stock experienced a 2% surge today, aligning with the broader market rally, and has rallied by 21% this month. The company is slated to report its third-quarter results on Tuesday, November 21. With the stock having risen continuously over 10 trading sessions, marking its longest winning streak since 2016 and gaining over $200 billion in market value, investors are contemplating whether it’s the right time to buy NVDA shares before they become even more expensive.

Zacks Investment Research
Image Source: Zacks Investment Research

Strengthening AI Capabilities

The demand for Nvidia’s graphics processors (GPUs) has been amplified due to their ability to power artificial intelligence. The upgraded H100 GPU, designed to fend off competitors like AMD (AMD) and Intel (INTC), is already shipping. Additionally, Nvidia’s announcement of the H200 chip, scheduled for release next year, is expected to further accelerate future AI models with faster response times, potentially keeping Nvidia ahead of AMD’s MI300 series chips.

Q3 Preview

In the previous fiscal quarter, Nvidia witnessed a staggering year-over-year earnings growth of 429%, with Q2 EPS at $2.70 per share, marking a 147% increase from the previous quarter. The company’s top-line growth has also been remarkable, with Q2 sales doubling from the prior year quarter. Q3 earnings are projected to reach $3.34 per share, a 476% surge from a year ago, with sales expected to climb 172%. With Nvidia having surpassed earnings expectations in three of the last four quarterly reports and posting an average earnings surprise of 9.79%, it might indeed be the right time to consider investing in Nvidia.

Zacks Investment Research
Image Source: Zacks Investment Research

The Trend of Positive Earnings Estimate Revisions

Positive earnings estimate revisions over the last three months for Nvidia’s current fiscal years indicate potential near-term upside, with FY24 earnings estimates rising by 38% and FY25 EPS estimates climbing by 51%.

Zacks Investment Research
Image Source: Zacks Investment Research

Bottom Line

Aligned with the trend of positive earnings estimate revisions, Nvidia continues to hold the coveted Zacks Rank #1 (Strong Buy) spot. With another quarter of outstanding growth expected during Q3 and a superior AI chip on the horizon, Nvidia’s stellar performance could very well continue.

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