Should you buy Nvidia stock before November 20? Wall Street has a compelling answer.

One of the most profound changes in the technology landscape in recent years has been the advancements made in the field of artificial intelligence (AI). There is a strong argument that the advent of AI early last year was one of the biggest sparks that ignited the current bull market rally. ChatGPT heralded the advent of generative AI, and since its release in November 2022, the S&P500 jumped 46%, while the Nasdaq Composite jumped 67% (at the time of writing).

Although there have been many beneficiaries of these secular tailwinds, one of the most notable has been Nvidia (NASDAQ:NVDA). In a nutshell, the company’s graphics processing units (GPUs), originally developed to create realistic images in video games, have proven to be just as competent at powering AI models.

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The resulting Nvidia chip race generated incredible financial results and sent the stock into the stratosphere. Since the start of last year, Nvidia stock is up more than 900% (as of market close Thursday), making the company a darling of the stock market.

Nvidia depends a lot on its financial results next week. Let’s look at the lead-up to this critical quarter, what Wall Street is saying, and what investors should expect.

Paint by numbers

As technologists began to understand the implications of generative AI in early 2023, demand for Nvidia’s AI-centric processors went from zero to 60 in just a few months. During the company’s second quarter of fiscal 2024 (ended July 30), the results were nothing short of stunning. Nvidia reported record revenue of $13.5 billion, up 101% year-over-year, while its adjusted earnings per share (EPS) of $2.70 soared 429%. Generally Accepted Accounting Principles (GAAP) EPS was even more striking, up 854%.

The next four quarters were equally impressive, each with record triple-digit sales and profit growth. Nvidia’s second quarter of fiscal 2025 (ended July 28) was the last in the sequence. Record revenue of $30 billion jumped 122% year-over-year, while adjusted EPS of $0.68 soared 152%. It’s worth noting that investors were concerned about Nvidia’s gross margin, which was declining, but this was a record high reached in the second quarter.

Savvy investors knew the company’s triple-digit streak would eventually end, and management suggested the time was right. For the soon-to-be-announced third quarter (ending October 29), Nvidia is forecasting revenue of $32.5 billion, which would represent 79% year-over-year growth.

This would mark a sharp slowdown from its recent growth rate, and the stock initially sold off on the news. However, in the three months since that report, cooler heads have prevailed and Nvidia stock has returned near its all-time highs.

The main driver of Nvidia’s future results is the upcoming release of its AI-centric Blackwell architecture. After a slow start due to production issues, management confirmed that the chips would be on track to ship by the end of the year. CEO Jensen Huang said in an interview that demand for the processors was “crazy.” He added: “Everyone wants to have the most and everyone wants to be first. » CFO Colette Kress previously said: “In the fourth quarter, we expect to generate several billion dollars of revenue for Blackwell. »

Nvidia’s strong track record of innovation has allowed the company to stay at the forefront of the AI ​​revolution, and it looks like that won’t change anytime soon.

What Wall Street is saying right now

As Nvidia’s critical report approaches next week, Wall Street remains resolutely optimistic. Consensus analyst estimates are for revenue of $33 billion, representing growth of about 82%. Nvidia has a strong track record of beating its own and Wall Street’s expectations, so the results could be more robust.

Of the 63 analysts who have given their opinions on Nvidia so far in November, 94% rate the stock a buy or strong buy, and none recommend selling it. The average price target of $157 suggests the stock has 11% upside potential. The consensus Buy rating and price target above the stock’s current price suggest that analysts believe Nvidia stock has further upside potential, but not to the same degree as at the current stock price. past year.

However, over the past few days and as Nvidia’s earnings report approaches, analysts have been rushing to update their models, leading to numerous price target increases this week (12, according to my calculations). Each of these price target increases was higher than the current consensus of $157, suggesting Wall Street is becoming even more optimistic.

Analysts were almost unanimous in their comments, citing the rapid adoption of AI and the construction of more robust data centers to meet growing demand. Furthermore, most analysts believe that Nvidia was conservative in its forecasts, which allowed the company to exceed expectations.

One of the most optimistic positions comes from Melius Research analyst Ben Reitzes. He maintained a buy rating on the stock and increased his price target to $185. “Even though it didn’t seem possible, we are even more excited about Jensen Huang’s next chip than before,” he wrote in a note to clients earlier this week.

For investors tempted to sell the stock, the analyst says: “Abandoning Nvidia here after its success – Hopper (AI chip) – is like abandoning Apple on iPhone 1 or 2.” He then called it a “once-in-a-lifetime opportunity,” saying Nvidia was a “must-have.”

What it all means

Overall, this suggests that Wall Street remains remarkably optimistic about Nvidia’s prospects – and for good reason. Even the most conservative estimates for the market opportunities represented by generative AI typically start at around $1 trillion, and many are much higher. So far, competitors have not been able to develop a solution that even comes close to Nvidia’s in terms of performance. Its GPUs therefore constitute the basis of the AI ​​revolution.

To be clear, I’m bullish on Nvidia and think the stock has a lot more to climb from here. That said, I am also aware of the volatility that is sure to follow in the weeks and months to come. If you have any doubts, remember that at the beginning of the summer, Nvidia stock lost 27% of its value in a few weeks, only to come back strong and reach new all-time highs.

Finally, there is valuation to consider. Wall Street projects that Nvidia will generate EPS of $4.16 in its 2026 fiscal year, which begins in late January. That means the stock is currently selling for about 34 times next year’s earnings. While that’s a slight premium, consider this: Nvidia’s revenue has grown 868% over the past five years, while its net income has increased 1,650%. This fueled a stock price rise of 2,610% (at the time of writing). This illustrates very clearly why Nvidia deserves a premium.

We’ll know more after Nvidia reports earnings after the market close on Wednesday, November 20.

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Danny Vena holds positions at Nvidia. The Motley Fool Ranks and Recommends Nvidia. The Motley Fool has a disclosure policy.

Should you buy Nvidia stock before November 20? Wall Street has a compelling answer. was originally published by The Motley Fool