Think it’s too late to buy Nvidia stock? Here is the biggest reason why there is still time

Nvidia (NVDA 1.51%) has become the most visible and influential fighting stock on the market. The artificial intelligence (AI) leader posted second-quarter results after the market closed on Aug. 28 and delivered a performance that crushed Wall Street targets. The company posted non-GAAP (adjusted) earnings per share of $0.68 on sales of $30 billion in the period, beating the average analyst estimate for earnings per share of $0.64 on revenue of $28.7 billion.

But despite substantial sales and earnings this quarter, Nvidia shares still lost ground following the report. With the company’s share price losing ground following a successful Q2 report, it’s not unreasonable to wonder if the hot AI leader may have finally hit a valuation peak.

While the stock could continue to see some volatility after the earnings review, there is good reason to believe the stock can bounce back and continue to climb higher.

Nvidia’s gross margins are holding up well and have a positive catalyst on the horizon

Thanks to AI-driven demand for the company’s most advanced processors, Nvidia has seen fantastic gross margins. The chart below tracks the company’s gross margin over a three-year period ending in the first quarter of the company’s 2025 fiscal year, which ended on April 28, 2024.

NVDA gross profit margin (quarterly) data by YCharts

With its recent report, Nvidia revealed that it posted a gross margin of 75.1% in Q2 and also guided for a 74.4% margin in fiscal Q3. For the full year, the company expects its gross margin percentage to be in the mid-70s. Based on the company’s recent results and forecasts, it looks like prices for its AI processors are coming down, but not by much.

Nvidia’s current top-of-the-line graphics processing units (GPUs) and accelerators still show a lot of pricing power, and big tech companies are still buying hardware to improve their AI infrastructure. Selling prices for the company’s current GPUs for advanced data center applications will likely continue to fall, but the AI ​​leader is preparing to release its next major chip platform.

Nvidia said production of its next-generation Blackwell chips will ramp up in the fourth quarter, and it looks like the new processors are ready to launch in late 2024 or early 2025. With the company’s current processors demonstrating pricing power and a major leap forward in GPU technology on the horizon, the bull case for the stock remains intact.