On Nov. 20, the market will receive perhaps the most anticipated earnings release of this season: artificial intelligence (AI) juggernaut Nvidia's (NVDA -2.09%) report for its fiscal 2025 third quarter. The company's current role in the tech world is so central that its report -- good or bad -- will have a sizable impact across the market. Some key questions loom and investors are eager to see if the numbers will match the hype.
With such a big event upcoming for the chipmaker, is now the right time to buy its shares?
AI infrastructure spending is still red-hot
The lion's share of Nvidia's revenue comes from the graphics processing units (GPUs) that it sells to companies like Microsoft, Meta Platforms, and Alphabet. These big tech players have laid out billions in capital expenditures (capex) over the past few years to build and upgrade data centers to meet the rising processing power demands of generative AI.
While there are certainly other hardware and software vendors benefiting from that spending, a significant portion of it is flowing into Nvidia's coffers. That's why it is an excellent sign for the chipmaker that on the most recent earnings calls from its big tech customers, their respective executive teams reiterated their commitments to building more AI infrastructure. They plan for their capex levels -- already at historic levels -- to grow further next year.
Capex spending is soaring for big tech companies in recent years.
GOOG Capital Expenditures (TTM) data by YCharts.
Meta, whose spending growth was the slowest of the three, is expecting its 2025 outlays to balloon. CEO Mark Zuckerberg said on Meta's Q3 call that capex growth would be "significant." He was adamant that the spending would be worth it. "It's clear that there are a lot of new opportunities to use new AI advances to accelerate our core business that should have strong ROI over the next few years," he said. "So, I think we should invest more there." This should be music to Nvidia's ears.
Blackwell is here
The expected growth in capex could be, in part, due to the companies' plans to upgrade their chips to Nvidia's newest line: Blackwell. The rollout of the Blackwell architecture chips was delayed slightly due to some now-resolved fabrication issues. Despite the fact they haven't yet launched -- they'll officially roll out sometime this quarter -- it has been reported that there is already a year-long waiting list for the new GPUs. A successful debut for Blackwell will be crucial for Nvidia -- but all signs suggest that's already a near certainty.
The Blackwell release comes on schedule with the new yearly upgrade cadence for AI chips that it announced in October 2023. Keeping up with that pace would be a tall order for any chip company. But if Nvidia can continue to release new chips each year that are meaningfully faster and more efficient than the prior models, it will be hard to unseat as the dominant player in AI chipmaking.
What history has to say
Over the past couple of fiscal years, here's what has happened to Nvidia's stock in the weeks after its earnings reports. The average result across those eight quarters was an upward move of 7.2% over the course of a week. (Nvidia's fiscal years run ahead of the calendar year -- its fiscal 2025, now underway, will end in late January 2025.)
| Quarter | Percentage Gain (Loss) |
|---|---|
| 2023 Q3 | 3.8% |
| 2023 Q4 | 9.4% |
| 2024 Q1 | 23.9% |
| 2024 Q2 | 4.6% |
| 2024 Q3 | (4.5%) |
| 2024 Q4 | 15.1% |
| 2025 Q1 | 20.9% |
| 2025 Q2 | (15.5%) |
Source: YCharts.com
While this is certainly interesting, past results are no guarantee of future results. A whole host of factors affect a stock's movement after a company delivers its earnings: In some cases, a company may offer a report that is generally positive, and still see its stock fall (as happened to Nvidia last quarter). Also, the vast majority of these moves by Nvidia were preceded by strong momentum. Getting into the stock a week before earnings would have served you better.
At the end of the day, however, investors shouldn't get hung up on movements over such short periods. You generally should be looking to invest with planned holding periods of five years or more. Focusing on short-term swings can lead to emotional decision-making, which generally leads to worse results over time.
Nvidia is in a strong position to continue growing its business, and it's a great pick to add to a diversified portfolio, whether you choose to buy it now or after Nov. 20.
