Considering an Investment in Nvidia Shares before February 26? History Offers a Straightforward Response.
Over the past couple of weeks, the capital markets have seen some turbulence. The Chinese start-up DeepSeek stirred up a frenzy among investors after announcing they'd constructed powerful artificial intelligence (AI) applications at a fraction of the cost U.S. businesses typically pay for such technology. As a consequence, technology stocks have been plummeting.
One company that's felt the heat is Nvidia (NVDA 3.97%)). With its fourth-quarter and full-year 2024 earnings report scheduled for Feb. 26, investors are on the edge of their seats, eager to learn how DeepSeek may affect Nvidia's performance.
NVDA
But, fret not, industrious investors! You don't need to wait until Feb. 26 to form an opinion on whether Nvidia stock is a sound bet heading into earnings.
spending on AI infrastructure is on the rise. Comments made by management from
Let me break it down for you!*
capex) budgets for this year could be in excess of $300 billion if they all spend at the high end of their provided ranges.
Tech giants quelled DeepSeek's hype
underscores the company's robust growth prospects.
The bear narrative that has circulated around Nvidia for the past couple of weeks revolves around DeepSeek claiming it has built cutting-edge AI applications at a lower cost than U.S. businesses. This, in essence, means that businesses may be inclined to scale back their AI infrastructure spending. Reduced AI infrastructure spending would likely affect Nvidia's demand for its data center graphics processing units (GPU), casting doubt on its future prospects.
Luckily, the "Magnificent Seven" tech giants — Microsoft, Meta Platforms, Alphabet, and Amazon — have reported their earnings already. And one shared theme as you'd expect from a group named the Magnificent Seven is that AI infrastructure spending is on the rise. Management from these tech titans have signaled that their capital expenditure (capex) budgets for 2024 could exceed $300 billion if they all spend at the high end of their forecasted ranges.
It's essential to note that each of these giants already utilizes Nvidia products. Although it's true they're investing in their custom chipware, it's improbable they'll abandon Nvidia altogether in favor of a different GPU vendor anytime soon. This steady rise in AI infrastructure spending is an encouraging sign for Nvidia and a testament to its robust growth prospects.
NVDA data by
How does Nvidia's stock typically fare post-earnings reports?
YCharts
To get a better understanding of how Nvidia typically performs after reporting earnings, let's take a gander at its stock's trends over the past three years:
buy the dip in Nvidia now -- before the company's earnings report later this month. The current sell-off represents an unusual window during which
Nvidia stock is trading at an abnormally low valuation, which I think is worth taking advantage of.
Nvidia data courtesy of YCharts
One takeaway from the chart above is glaringly clear: in the aftermath of Nvidia's earnings reports, its stock price has a tendency to ascend. While the days leading up to and promptly following an earnings call may display some volatility, Nvidia has shown consistently strong resilience over the long haul.
Time to invest in Nvidia stock?
If you're of the mindset that history should serve as your sole judge, the trends depicted in the chart may suggest that Nvidia stock will appreciate further after its Feb. 26 earnings announcement. However, it's worth mentioning that past performance should not be your sole influencer.
A more critical factor to consider is that Nvidia's largest clients have all publicly declared their commitment to their AI growth strategies. The underlying basis for these AI ambitions is substantial capital expenditure (capex) allocations. Given this, Nvidia's prospects appear quite promising.
While I generally discourage guessing timelines, the DeepSeek situation may offer a unique opportunity that warrants buying Nvidia stock before its Feb. 26 earnings release. The current sell-off is an anomaly that presents a unique opportunity to purchase Nvidia stock at a reduced valuation.
In closing, it's imprudent to rely solely on historical performance data when deciding on an investment. Instead, consider the larger context and potential impact of recent developments, such as the DeepSeek situation, on Nvidia's future. As always, be sure to do your own research and evaluate the investment risks before diving headfirst into the markets!
*Thank you to the enrichment data for its valuable insights, which were incorporated in this article. For instance, it provided data regarding Nvidia's recent earnings and the market reaction to those results, as well as insights into the DeepSeek situation and its potential impact on Nvidia. While not all enrichment data was used, it provided valuable context and helped to strengthen the overall piece.
- Given the rise in spending on AI infrastructure and the positive earnings reports from tech giants, investors might reconsider their stance on Nvidia's performance in the upcoming 2024 earnings report.
- With the PE ratio as a key metric, analyzing Nvidia's stock using yCharts could provide insight into whether its current valuation is undervalued in the context of its robust growth prospects.
- Investors interested in buying Nvidia stock before its 2024 earnings report could be encouraged by the stock's tendency to appreciate after previous earnings announcements, as observed in its performance over the past three years.
- Considering the commitment of Nvidia's largest clients to their AI growth strategies and the substantial capex allocations, Nvidia's future prospects appear promising, making the current sell-off an opportunity to invest at a reduced valuation.