2 incredibly simple reasons to buy Nvidia shares before November 20th

Nvidia'S (NASDAQ:NVDA) The rise of artificial intelligence (AI) has continued in 2024. Cloud service providers, governments and anyone wanting to jump on the AI bandwagon are lining up to buy the company's graphics processing units (GPUs) to train and deploy AI models.

Shares of the leading semiconductor company are up 173% this year. A closer look at recent developments in the AI ecosystem will tell us that the stock's run-up is likely to continue, with the company's upcoming earnings for the third quarter of fiscal 2025 likely acting as a catalyst. The chipmaker will report its third-quarter financial results (for the three months ended October 27) on November 20.

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Let's look at why it might be a good idea to buy this high-profile AI stock before its earnings are released.

Nvidia competes in the AI chip market Advanced micro devices (NASDAQ:AMD) And Intel (NASDAQ:INTC). However, AMD's latest results suggest that the company is nowhere near Nvidia in the AI graphics processing unit (GPU) market. In the third quarter of 2024, AMD's data center business reported a 122% year-over-year increase in revenue to $3.5 billion. For comparison, Nvidia's data center revenue was significantly higher at $26.3 billion in the second quarter of fiscal 2025 (which ended in July).

It's worth noting here that despite the company's size, Nvidia's data center revenue grew a staggering 154% year-over-year in its most recent reported quarter. Additionally, AMD sells both server GPUs and central processing units (CPUs), but hasn't been able to gain as much of a foothold in the AI chip market as Nvidia.

Meanwhile, Intel continues to lag behind. It originally expected to sell $500 million worth of AI GPUs this year. However, Intel management noted in its most recent earnings call that “overall adoption of Gaudi has been slower than we expected.” As a result, Intel won't be able to hit its $500 million revenue target this year, suggesting it won't cause much trouble for Nvidia.

AMD, on the other hand, expects AI GPU sales to reach $5 billion in 2024. These numbers are well below the value of AI GPUs Nvidia sells in just one quarter, confirming that Nvidia remains the dominant force in the AI chip market. Ultimately, given the current sales development, Nvidia could end the current year with AI GPU sales of $84 billion.

When you add up the potential AI GPU sales projections from Nvidia, AMD, and Intel, it's clear that Nvidia currently controls more than 90% of this market. More importantly, even after two years, competitors have failed to make significant progress in the AI chip market. As a result, Nvidia is still in a great position to capture the majority of AI GPU spending.

AMD estimates the data center AI accelerator market will reach $500 billion in annual revenue by 2028, and Nvidia's solid market share means the company is in the best position to make the most of this market.

Another key theme emerging from recent earnings reports from major technology companies such as: Metaplatforms (NASDAQ:META) And Microsoft (NASDAQ:MSFT) is that they will continue to spend a lot of money building the AI infrastructure.

Meta Platforms, for example, raised the low end of its 2024 capital expenditure (capex) forecast. The company now expects to spend between $38 billion and $40 billion in capital expenditures this year, compared to the previous range of $37 billion to $40 billion. However, the company also added that it expects “a significant acceleration in infrastructure spending growth next year.”

Meta CEO Mark Zuckerberg points out that the company's AI efforts will require more investment if the company wants to get the most out of this technology. In the recent earnings call, Zuckerberg pointed out:

First, it is clear that there are many new opportunities to leverage new AI advances to advance our core business, which should deliver strong ROI over the next few years. So I think we should invest more there.

Microsoft is also spending a lot of money on AI infrastructure. Capital spending was $20 billion in the first quarter of fiscal 2025, up significantly from $11.2 billion in the same quarter last year. It's worth noting that Microsoft spent $55.7 billion in capital expenditures in fiscal 2024, and the company's spending in the first quarter of 2025 suggests a significant acceleration on this front.

In fact, Microsoft management expects “capital spending to increase sequentially based on our cloud and AI demand signals.” All of this tells us that demand for AI hardware will remain strong and help Nvidia maintain the impressive growth the company has seen.

Consensus estimates compiled by Yahoo! The finance department expects Nvidia to generate third-quarter revenue of $32.9 billion when the company releases its quarterly report later this month. The company's earnings are expected to double year-over-year to $0.74 per share. When the chipmaker reported its previous results in August, it forecast halftime revenue of $32.5 billion, meaning analysts expect the company to see stronger growth.

Continued strong demand for AI hardware, as well as Nvidia's manufacturing partner's capacity expansion efforts, suggest the company could end up beating consensus estimates – a scenario in which this high-flying AI stock could get a good boost. Given that Nvidia is currently trading at an attractive 35 times forward earnings, compared to the U.S. technology sector average of 45, investors have another good reason to buy this stock before the company's earnings call on November 20th Quarterly results published.

Before you buy Nvidia stock, consider the following:

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Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool's board of directors. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends Intel and recommends the following options: long $395 January 2026 calls on Microsoft, short $405 January 2026 calls on Microsoft, and short $24 November 2024 calls on Intel. The Motley Fool has a disclosure policy.

“2 Incredibly Simple Reasons to Buy Nvidia Stock Before November 20” was originally published by The Motley Fool

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