Contemplating the Purchase of Nvidia Shares Prior to Nov. 20? History Offers These Insights
Over the past couple of weeks, capitalists have been nervously anticipating various corporations to unveil their third-quarter earnings statistics. Factors like the election and prominent themes in artificial intelligence (AI) have added an additional layer of uncertainty to this particular earnings phase.
Primarily, major tech corporations have delivered decent outcomes. However, the "Wonderful Seven" member that everyone is the most intrigued about has yet to report: Nvidia (NVDA -1.68%). That will change on Nov. 20.
This specific earnings report could carry more weight than usual. Below, I've outlined what investors should be scrutinizing, along with my perspective on whether they should purchase shares before the awaited data drop.
Why this earnings report is so critical
For the past two years, Wall Street financiers and Nvidia aficionados have been primarily fixated on the development trends in its compute and networking business. In particular, sales linked to the company's data center services and graphics processing units (GPUs) appear to be all anyone wants to discuss.
The forthcoming earnings report will be no exception. When CEO Jensen Huang and CFO Colette Kress address investors during the earnings call, I can almost guarantee that the executives will be inundated with inquiries about one specific matter: the upcoming launch of its Blackwell chip line, Nvidia's most potent GPUs yet.
While preliminary reports have hinted that Blackwell could generate $10 billion in revenue by the end of the year, there's a finer point that I would encourage investors to pay attention to.
One of Nvidia's most intimate partners is IT infrastructure company Super Micro Computer. Supermicro specializes in offering the storage cluster architectures that house GPUs such as those produced by Nvidia. However, in recent months, Supermicro has been entangled in some drama. Chiefly, the company delayed submitting its annual report, and last week was discarded by its auditor.
In response, Nvidia is supposedly shifting some of its supply chain initiatives away from Supermicro in favor of other IT architecture specialists. Although this appears to be a sensible move, I will be intrigued to see if this transition affects Nvidia's financial predictions related to Blackwell in any manner.
How does Nvidia stock typically fluctuate around its earnings reports?
The chart below illustrates Nvidia's stock price over the past two years, with annotations that show when its quarterly reports were published.
Around the time of its earnings reports, investors can observe that Nvidia's share price tends to exhibit a bit more volatility and momentum. In my opinion, Nvidia's comments regarding Supermicro and Blackwell could significantly influence the stock price, either positively or negatively.
Consider the long-term view
The underlying idea here is that Nvidia's stock has soared significantly over the past couple of years, and that the share price has demonstrated a decent amount of sturdiness even after some temporary sell-offs.
While Nvidia's multibagger returns over the past couple of years make the stock appealing, investors should keep in mind that competition in the GPU space is intensifying. Even though this won't be too damaging to Nvidia, new chips from other providers could potentially impact the company's growth further down the line.
Ultimately, I think investors should attentively listen to any remarks from Nvidia's leadership regarding Blackwell that could help them decipher how these new GPUs will fare in the face of increasing competition. To me, purchasing Nvidia ahead of its upcoming earnings report is too risky -- a move better suited for a short-term trader than a long-term investor.
For this reason, I would advise investors to remain on the sidelines with Nvidia for now, and urge them to continue amassing as much information as possible before jumping on the bandwagon.
The upcoming earnings report from Nvidia is crucial due to the company's focus on its compute and networking business, particularly the upcoming launch of the Blackwell chip line, which is expected to generate significant revenue. Investors should pay attention to how this transition away from Supermicro, Nvidia's intimate partner, may impact Nvidia's financial predictions related to Blackwell.
Given the volatility and momentum that Nvidia's stock typically exhibits around earnings reports, any comments from the company regarding Supermicro and Blackwell could significantly impact the stock price. Therefore, investors should carefully consider the long-term view, acknowledging the intensifying competition in the GPU space and the potential impact of new chips from other providers.
