Nvidia (NASDAQ: NVDA) stands as a prominent protagonist within the ever-turbulent realm of the stock market. After unveiling its second-quarter performance on Aug. 28, the artificial intelligence (AI) luminary left Wall Street in awe by surpassing all its projections. The champion posted non-GAAP earnings per share of $0.68, coupled with a staggering $30 billion in sales. These figures trounced the average analyst estimates of $0.64 in earnings per share and $28.7 billion in revenue.
Despite this commendable feat, the stock price of Nvidia took a tumble post-report. Observers might ponder whether this high-flier of the AI world has finally scaled the summit of its valuation.
While post-earnings tides might swirl through Nvidia’s valuation, a compelling motive exists to anticipate a resurrection in the stock’s trajectory towards loftier altitudes.
Nvidia’s Resilient Gross Margins: A Catalyst on the Horizon
Nvidia has been basking in the warm glow of remarkable gross margins, all thanks to the insatiable demand for its cutting-edge processors. The performance chart below traces Nvidia’s gross margin trends over a three-year phase, culminating at the conclusion of the initial quarter of the fiscal year 2025, ending on April 28, 2024.
NVDA Gross Profit Margin (Quarterly) data by YCharts
As evidenced by its recent disclosure, Nvidia flaunted a Q2 gross margin of 75.1% and forecasted a margin of 74.4% in fiscal Q3. Anticipations are set for a mid-70s gross margin percentage for the full year. The company’s latest results and forecast hint at a slight decline in the pricing of its AI processors. Nonetheless, Nvidia’s premier graphics processing units (GPUs) and accelerators are exuding resolute pricing power, with tech titans voraciously devouring hardware to enhance their AI foundations. Although prices for Nvidia’s existing GPUs for advanced data center applications may observe a decline, the impending launch of the novel Blackwell chip platform is poised to inject fresh vigour into the sector.
Nvidia has unveiled that the manufacturing of its forthcoming Blackwell chips is slated to scale up in Q4, hinting at a potential release in late 2024 or early 2025. With the current processors boasting unyielding pricing supremacy and a quantum leap beckoning in GPU technology, the bullish narrative for the Nvidia stock remains vibrant.
Contemplating a $1,000 Investment in Nvidia: Is It a Timeless Move?
Prior to taking the plunge into Nvidia’s stock, a word of caution might be prudent:
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Keith Noonan holds no position in the stocks mentioned above. The Motley Fool endorses and holds positions in Nvidia, adhering to a transparent disclosure policy.
