Nvidia’s Stock Dilemma: Exceptional Earnings Meet Investor Caution

Nvidia (NASDAQ: NVDA) is experiencing a setback despite impressive financial performance. After a strong quarter that doubled its earnings per share (EPS) year over year, the company’s stock fell sharply. Expectations for Nvidia have reached unprecedented heights, but the company continues to deliver strong results.

This situation isn’t new for Nvidia. Following its last earnings report, the stock dropped by nearly 20% before rebounding almost 35%. There are solid reasons to maintain a positive outlook; the upcoming year is poised to bring significant opportunities for the company.

On Tuesday, December 3, Nvidia engaged with other leading artificial intelligence (AI) firms at the annual UBS Global Technology and AI Conference. This event provides Nvidia with a platform to showcase its leadership and outline the substantial potential ahead. It highlights how AI can create tangible value in the real world.

While one conference may not significantly impact stock prices, each opportunity to present its case can be meaningful. Here are three compelling reasons to consider Nvidia as a strong investment moving forward.

1. Nvidia’s Hardware Remains Unmatched

This isn’t surprising, but it’s essential to acknowledge: the AI market is enormous and rapidly expanding. PwC, a prominent accounting firm, estimates that AI could contribute $15.7 trillion to the global economy by 2030. Statista also forecasts a compound annual growth rate (CAGR) of 28.3% for the overall AI market through the same year.

Prominent CEOs in Silicon Valley have echoed these sentiments, reaffirming their commitment to AI and dedicating billions to AI infrastructure. For instance, during Meta‘s last earnings call, CEO Mark Zuckerberg indicated that despite significant capital expenditures, further investment in AI would be necessary, as it will enhance Meta’s core business with substantial returns on investment over the next few years.

That bodes well for Nvidia, as its chips power most of the AI industry, a stronghold that is expected to persist. Currently, no competitor, including AMD, has a product that rivals the performance of Nvidia’s flagship chips. Although competition may increase, Nvidia’s significant resources in capital and talent help it secure its market position.

2. Big Launch with Blackwell

Nvidia is set to release Blackwell, its latest line of Superchips, this month, with samples already delivered to major clients. These chips are more than twice as powerful as the existing Hopper chips, generating high demand. CEO Jensen Huang described the interest as “staggering,” and reports indicate that the company has been sold out for an entire year.

This launch is pivotal for Nvidia, and Wall Street is eager for results. During its Q3 earnings call, Nvidia’s executives projected a successful rollout for Blackwell, expecting shipping numbers to exceed previous forecasts. There’s potential for the revenue generated by Blackwell to surpass analyst predictions, with more details emerging in the coming months.

3. Agentic AI: The Next Frontier

Recently, the term agentic AI has gained traction. Nvidia’s focus during the earnings call emphasized not just Blackwell’s launch but also the development of agentic AI, defined as AI capable of actionable tasks rather than mere creation. Jensen Huang describes agentic AI as “AI coworkers” that enhance employee productivity.

If executed effectively, agentic AI could unlock significant efficiencies across various organizations. A key concern remains whether AI can justify the high costs associated with its implementation. This is potentially where Nvidia could lead the way by providing an operating platform for agentic AI, already adopted by industry leaders to develop “copilots,” a term for AI assistants.

Should You Invest $1,000 in Nvidia Now?

Before investing in Nvidia, it’s essential to consider this:

The Motley Fool Stock Advisor analyst team has identified what they believe are the 10 best stocks to buy right now, and Nvidia is not among them. The stocks that made the list could deliver exceptional returns in the future.

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Randi Zuckerberg, former director of market development for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, sits on The Motley Fool’s board of directors. Johnny Rice holds no positions in the mentioned stocks. The Motley Fool has investments in and recommends Advanced Micro Devices, Meta Platforms, and Nvidia. The Motley Fool maintains a disclosure policy.

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