Should you buy Nvidia (NVDA) stock ahead of next week’s earnings?

Nvidia Corporation (NASDAQ: NVDA) is probably the best-performing semiconductor company currently, successfully navigating the market downturn and creating strong shareholder value. The chipmaker is well-positioned to take advantage of the massive shift to generative AI and transition from general-purpose computing to accelerated computing.

Nvidia’s stock climbed to a record a month ago, but pulled back since then and experienced weakness in the following weeks. Experts are quite optimistic about the growth prospects of NVDA, which is expected to rise in double digits in the coming months and go beyond the $500 mark. The price has more than doubled since last year and the company is valued at more than $1 trillion now.

AI Power

There has been an exceptional growth in computing requirements lately, mainly driven by the mass adoption of generative AI. Nvidia is a preferred choice for customers as the platform is considered highly versatile, energy-efficient, and less expensive for training and deploying AI. That would enable the company to leverage the high demand, at a time when supply is under pressure.

From Nvidia’s Q1 2024 earnings call:

“Generative AI drove significant upside in demand for our products, creating opportunities and broad-based global growth across our markets. Let me give you some color, across our three major customer categories, cloud service providers or CSPs consumer Internet companies, and enterprises. First CSPs around the world are racing to deploy our flagship Hopper and Ampere architecture GPUs to meet the surge in interest from both enterprise and consumer AI applications for training and inference.”

Q2 Report Due

After reporting not-so-impressive results for the first quarter of 2024, Nvidia is preparing to publish second-quarter numbers on August 23, after the closing bell. It is estimated that the company did quite well in the latest quarter, in terms of revenue and earnings performance. Experts are looking for earnings of $2.06 per share for the July quarter, adjusted for special items, which represents a four-fold increase from the year-ago quarter. The bullish earnings forecast reflects an estimated 66% surge in revenues to $11.14 billion. That is slightly higher than the revenue target of around $11 billion set by the company.

In the past, quarterly earnings surpassed the market’s estimates consistently, except in the third quarter of 2023 when the bottom line fell short of expectations. Adjusted earnings dropped 20% from last year to $1.09 per share in the first quarter of 2024 when a double-digit jump in the core Data Center revenues was not enough to offset a sharp decrease in Gaming revenues. At $7.19 billion, the top line was down 13%. Meanwhile, unadjusted profit increased 28% annually to $0.82 per share.

Shares of Nvidia traded slightly higher on Wednesday afternoon after starting the week on a bright note. The value has more than doubled in the past six months.