The artificial intelligence (AI) boom will get another big test this week.
Nvidia (NASDAQ: NVDA), the chipmaker that has become the flag-bearer for the generative AI revolution, will report fourth-quarter earnings after hours on Wednesday. Wall Street eagerly awaits this impending financial update as Nvidia has experienced unprecedented market success and highly impressive year-to-date growth.
Anticipated Expectations for Nvidia’s Earnings
Nvidia has undeniably experienced extraordinary demand for its GPUs, accelerators, and other chips well-suited for AI models like ChatGPT. Wall Street’s recurrent underestimation of Nvidia’s product demand is a glaring oversight evidenced by the company consistently surpassing all estimates, coupled with the issuance of guidance that repeatedly exceeds the consensus.
For the upcoming fourth quarter, analysts predict a momentous 237% increase in revenue to $20.4 billion, with earnings per share projected to leap from $0.88 to $4.56. Albeit lofty, these forecasts are not unfounded. In the third quarter, Nvidia’s revenue surged by a substantial 206% to $18.1 billion. Furthermore, Nvidia anticipates revenue of approximately $20 billion in the imminent fourth quarter.
Nvidia’s Partners and their Influence
Reports from Nvidia’s partners, such as Arm and Super Micro Computer, signal the ongoing acceleration of the AI boom. These companies have seen remarkable financial results in their recent earnings reports, indicating a surge in AI-related demand. Their success suggests promising implications for Nvidia’s forthcoming earnings update, as these entities are all benefiting from the same escalating trends.
Investor Dilemma: Buy Now or Wait?
Whether to invest in Nvidia before or after its earnings report remains a quandary. As a long-term investor, the preferable course of action involves a commitment of at least a year to experience the benefits of tax advantages and mitigate the volatility inherent in the stock market. The timeless wisdom of Benjamin Graham aptly captures the essence of this investment approach, emphasizing the importance of sturdier, long-term convictions over fleeting market whims.
Braving the unpredictability of Nvidia’s stock movement post-earnings is a decision best made with unwavering faith in its sustainable competitive advantages. Nvidia’s ability to continue dominating the GPU and AI chip market, alongside its strategic expansion plans into new sectors like PCs, should serve as the cornerstone of a well-informed investment strategy.
While euphoria for Nvidia and other AI-exposed stocks remains prevalent, recent upsurges from Arm and Super Micro Computer suggest that the market may be underestimating the potential of AI hardware stocks like Nvidia. The options market also reflects a similar sentiment, largely betting on an upturn for Nvidia post-earnings. Additionally, Nvidia’s strengthening competitive edges and the impending expansion of demand for AI applications in the years ahead further reinforce its position as an astute long-term investment despite its substantial growth in the stock market.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Jeremy Bowman has positions in Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Microsoft, and Nvidia. The Motley Fool recommends Super Micro Computer and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.