Should You Buy Nvidia Stock Before August 28th? Here’s what the evidence suggests.

Adoption of artificial intelligence (AI) is underway, but some investors fear the trend is getting a little longer. Concerns about the economy and weakness in AI stocks have contributed to the push Nasdaq Composite into correction territory earlier this month, and with valuations stretched, some believe there could be further declines ahead.

Nvidia (NVDA -0.21%) has become the poster child of the generative AI trend. When the company reports its results later this month, it’s no exaggeration to suggest that Wall Street will be on the edge of its seat, hoping to gain insight into the state of AI adoption.

Nvidia’s sales have skyrocketed since the start of 2023, pushing the stock up 619% (at the time of writing), though it’s currently over 22% off its peak.

With so much going into Nvidia’s quarterly results, investors are wondering if the recent drop in the stock price represents a buying opportunity ahead of the company’s highly anticipated financial report. Let’s look at the available evidence.

Image source: Getty Images.

Anecdotal data is powerful

The biggest driver for Nvidia over the past 18 months has been the rapid adoption of generative AI by cloud infrastructure providers best positioned to monetize AI. Nvidia’s graphics processing units (GPUs) are the gold standard for these applications.

As a result, cloud infrastructure providers, incl Amazon web services, Microsoft Azure, and AlphabetGoogle Cloud have upgraded their data centers to provide the computing power needed to run AI. Even Meta platforms has jumped on the bandwagon, creating one of the leading Large Language Models (LLMs) so that it can take advantage of AI.

Demand for Nvidia’s AI-focused processors remains strong among cloud leaders, and each has highlighted plans for higher capital spending to support its AI aspirations. This bodes well for Nvidia in the current quarter.

Rivals and partners report robust sales

There is further evidence to suggest that Nvidia’s results will be robust.

Advanced microdevices (AMD -1.50%)otherwise known as AMD, is one of Nvidia’s biggest rivals in the GPU space. The company reported its second-quarter results late last month, and the strength of its AI-related sales caught many market watchers off guard. While revenue rose 9% year-over-year and beat expectations, its data center sales rose to a record $2.58 billion, up 115%, due to increased demand for AI.

Arm holds (ARM -1.21%) creates the CPU cores found in many of Nvidia’s AI processors, and its results were similarly upbeat. For its fiscal first quarter 2025 (ended June 30), Arm reported its fourth consecutive quarter of record results. The company generated record revenue of $939 million, up 39% year-on-year, driven by record licensing revenue driven by the “proliferation of AI.”

Super Micro Computer (SMCI -0.23%) provides server and storage solutions with next-generation AI processors from Nvidia and others. For the company’s fiscal fourth quarter 2024 (ended June 30), revenue of $5.3 billion was up 143% year-over-year and 38% quarter-over-quarter. Despite its parabolic growth rate, management noted that Supermicro continued to be hamstrung by “supply chain bottlenecks” in the near term.

The thread running through these AI players is that demand has remained strong in the most recent quarter, driven by the secular tailwind of AI. This suggests that Nvidia’s sales should be similarly robust.

The stock split is bullish

There are other reasons to think Nvidia stock could have an additional edge here. Analyst research from Bank of America shows that in the 12 months after a stock split was announced, stock splits gained an average of 25%, compared to just 12% for S&P 500.

Since Nvidia announced its stock split on May 22, the stock has actually fallen 19% (as of this writing) as fears about the state of the economy have overshadowed AI tailwinds. If history is any indicator, Nvidia still has plenty of double-digit growth potential ahead.

Are the shares bought before August 28?

For investors looking to make a quick buck, Nvidia is probably not the stock for you. As the recent stock chart shows, Nvidia has been — and will continue to be — a volatile stock. While investors who bought last year are likely to see triple-digit gains, those who bought last month could be down more than 22%. This helps illustrate a timeless truth of investing: It’s best to buy stocks in the best companies you can find and hold them for three to five years because you’re less likely to suffer the impact of volatility on short term.

For those wondering whether Nvidia stock will go up or down after its upcoming financial report, your guess is as good as mine. I sent my crystal ball to the store years ago, but it still hasn’t returned. Moreover, anyone who claims to know what will happen in the days or weeks ahead is not being honest.

If I had to hazard a guess — and that would be it — I’m guessing Nvidia will report another record quarter of sales. Analysts’ consensus estimates were calling for revenue of $28.52 billion, slightly higher than Nvidia’s estimate of $28 billion. However, much of how the stock price reacts to the report will depend on the company’s profitability and Nvidia’s forward-looking guidance.

It’s important to step back and look at the big picture. Nvidia GPUs are the gold standard for AI processing, and while there’s always the threat of competition, no successor has emerged. Most experts believe it is still early days for generative AI as adoption continues to grow. Even the most conservative estimates suggest that generative AI will be a trillion dollar market, with some predictions crowding higher.

Nvidia stock trades at a premium of 38 times earnings (as of this writing), but the company’s triple-digit growth, industry leadership, and long track record show it’s worth every penny.

My advice to you is this: If you believe — as I do — that AI has a long way to go and Nvidia will maintain its market dominance, then buy Nvidia stock and hold on for dear life.