3 Reasons to Buy Nvidia Stock Before October 7th

It’s no secret that artificial intelligence (AI) stocks have dominated the market in recent years. With firms like PwC – one of the “big four” accounting firms – claiming AI could add $15.7 trillion to the global economy by 2030 – the hype makes sense.

The poster child of the revolution, Nvidia (NASDAQ: NVDA)has seen its stock explode nearly 1,000% from late 2022 to today, but the past few months haven’t been as kind. After hitting an all-time high in June, Nvidia shares are down about 10%. More significant market fears, combined with slower growth, have led some to cool on once-hot stocks. So where do I go from here?

Nvidia’s AI Summit is a big day for the company and the industry

As the de facto leader of the entire industry, Nvidia must continue to do just that: lead. The 2024 AI Summit, which starts on October 7, is a chance for the company to bring together some of the biggest faces and best minds in the industry to help push AI forward, all while maintaining in the foreground. It’s a chance to communicate Nvidia’s vision not only to other industry leaders, but also to the general public.

One of the main questions investors have for the company — and it’s a very legitimate one — is: Are there real applications of AI? that of impact? Is the incredible cost of AI hardware worth the investment? The summit will be a chance for Nvidia to showcase the myriad ways AI can be used to return real value. It’s a chance to justify the enormous cost of its tokens and ultimately its stock price.

The event itself is unlikely to move the needle, but it may help ease some fears and get investors thinking about the possibilities and power of AI. Fortunately, the event does not take place in a vacuum. Here are a few reasons why Nvidia is in a prime position to capitalize on the event.

1. Nvidia’s Blackwell chips are coming

In Nvidia’s only major setback since the AI ​​boom began, the company announced that its latest line of chips, called Blackwell, has been delayed. Manufacturing problems meant they would not be delivered on time. Nvidia has assured that deliveries will only be delayed by a quarter. Despite these assurances, some investors worried that the problems were more fundamental and that the delay would be longer.

It turns out those fears were unfounded. According to a recent report by Tom’s Hardware, the company is ready to ship the first batch as early as December, just about six weeks behind the original schedule, although these reports have yet to be confirmed by Nvidia. If true, it would go a long way to assuage investor fears and show that the company has gone above and beyond to fix its mistake.

Still, even if it doesn’t ship until later in the quarter, the launch will be huge for the company regardless. Their impact will be felt immediately, with billions in sales expected before the end of the fourth quarter.

2. Nvidia’s vision is its biggest asset

It’s easy to get bogged down in numbers and focus on balance sheets and income statements, and while these are extremely important when evaluating a business, certain intangibles are often what make a great company, such as vision. Nvidia has it in spades. Under the leadership of CEO Jensen Huang, the company has been at the forefront of several macro moves in technology. Huang saw in the early 90s that computer graphics would be huge. The company’s GPUs — graphics processing units — are a big part of what has allowed the video game industry to evolve to where it is today.

This vision is why the company controls about 90% of the current AI chip market. Nvidia saw that its GPUs could do much more than push the limits of computer graphics; it could fuel a new technological revolution. This is why the company has caught its competition napping. Since the current AI boom began in late 2022, Nvidia’s chips have consistently been miles ahead. Since then, other chipmakers have played catch-up.

There has been relative parity between Nvidia and its longtime rival AMD for decades. It is no longer so; Last year, Nvidia made more profit than AMD did in total revenue. The difference at the moment is strong, but remember, if Nvidia is making a lot more profit than its rival, then it can afford to spend more on research and marketing to widen its moat and chase away its competitors.

3. Given its prospects, Nvidia is reasonably priced

I know I just said not to get bogged down in numbers, but they are still important. How does the market rate Nvidia right now? At a price-to-earnings (P/E) ratio of 56, Nvidia isn’t cheap, but given its current growth rate, a trailing P/E isn’t really the best measure for us. The forward P/E — that is, a P/E that represents expected earnings over the next 12 months, rather than the past 12 — is just over 30. Not bad in the tech world. It’s just about where Apple and Amazon wait

Another useful valuation is the PEG ratio, which you get by dividing a company’s P/E by its expected earnings growth. This is a great metric for companies with a lot of growth potential. As a very general rule of thumb, a PEG below 1 is what we’re looking for. Nvidia is 0.94.

Nvidia has plenty of room to deliver the kind of growth that can justify its current valuation. To be sure, values ​​are not the be-all and end-all. They are imperfect tools, and of course metrics that are based on expected earnings are particularly imperfect — the future is not guaranteed. I think Nvidia will continue to outperform the market for some time.

Should you invest $1,000 in Nvidia right now?

Before buying Nvidia stock, consider the following:

The Motley Fool Stock Advisor the analyst team has just identified what they think they are 10 best stocks for investors to buy now… and Nvidia wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you would have $752,838!*

Stock advisor provides investors with an easy-to-follow blueprint for success, including portfolio construction guidance, regular updates from analysts, and two new stock picks every month. The Stock advisor the service has more than four times return of the S&P 500 since 2002*.

See the 10 stocks »

*The stock advisor returns as of September 30, 2024

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon, Apple and Nvidia. The Motley Fool has a disclosure policy.

3 Reasons to Buy Nvidia Stock Before October 7th was originally published by The Motley Fool