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Nvidia nearly triples in value over 11 months: Is it time to invest?
Nvidia (NVDA) stock opened the year at about $50 per share, on a split-adjusted basis. As of late November 2024, the semiconductor stock's price had eclipsed $145. The growth equates to a year-to-date value increase of almost 195%. The gain is related to the rising demand for Nvidia's high-performance chips that can power artificial intelligence workloads.
When one of the world's largest companies nearly triples in value over 11 months, investors take notice. You might naturally wonder if Nvidia will keep growing and, if so, whether you can benefit.
To help you decide if you should invest in Nvidia, let's review key factors from the company's last earnings release and the questions you should consider before placing a buy order.
Learn more: How does Nvidia make money?
Nvidia's third-quarter highlights
Nvidia reported $35.1 billion in revenue and $0.81 in non-GAAP diluted earnings per share (EPS) in the third quarter. Revenue had increased by 94% from the prior-year quarter, and EPS rose 103% year over year.
Learn more: Track Nvidia’s stock price here
Notably, Nvidia generated nearly 88% of its revenue from its data center reporting segment, which includes the company's AI computing solutions. Data center revenues grew 112% year over year, outpacing the company's other three segments. Nvidia's gaming revenues grew 15%, professional visualization revenues were up 17%, and automotive and robotics revenues increased 72%.
Nvidia’s outlook
Nvidia first reported triple-digit data center revenue growth in the second quarter of fiscal 2024. Now that the company has lapped those gains, comparisons will be more challenging going forward. Even so, Nvidia's leadership team expects more growth.
The company's fourth quarter revenue guidance is $37.5 billion, plus or minus 2%. This compares to revenue of $22.1 billion in the fourth quarter of fiscal 2024. The non-GAAP gross margin expectation for the upcoming quarter is 73.5%, plus or minus 50 basis points. Nvidia has held its non-GAAP gross margin over 70% throughout this recent growth phase, since the second quarter of fiscal 2024.
Latest news: Nvidia earnings, forecasts top expectations as 'age of AI is in full steam'
Nvidia’s Blackwell launch
Nvidia plans to ship its most powerful graphics processing units, or GPUs, to date later this year. The launch is one for investors to watch. According to Nvidia, the next-generation Blackwell chips will deliver more computing power with lower energy consumption than the company's industry-leading H100 chip.
Nvidia recently reported positive test results for the Blackwell platform. Against MLPerf Training 4.1 industry benchmarks, Blackwell delivered up to 2.2 times more performance per GPU. MLPerf benchmarks are developed by a consortium of AI leaders from multiple disciplines to evaluate workloads for machine-learning workflows.
If Blackwell chips live up to expectations, it could spark another wave of strong AI hardware demand.
Video: Nvidia's Blackwell and what it means for AI chip demand in 2025
Questions to ask before investing in Nvidia
Nvidia has business momentum, but that does not solely justify a decision to invest. An ownership position in the chip designer only makes sense when it aligns with your risk tolerance, investing goals, and interests. Before you buy, test this alignment using the eight questions below.
Learn more: How to start investing: A step-by-step guide
No. 1: Can I handle large fluctuations in Nvidia's price?
Nvidia lost 50% of its value in 2022. The company also fell nearly 83% in 2002 after the dot-com bubble burst.
The stock recovered from both declines eventually, but Nvidia remains a high-volatility position. The potential for large value changes, up or down, should influence how much Nvidia stock, if any, you want to own.
No. 2: Is my portfolio diversified so I’m not wholly dependent on Nvidia?
Diversifying your holdings beyond Nvidia provides some protection from future volatility. Consider setting a cap on your relative Nvidia exposure based on your risk tolerance. A conservative approach, for example, would be limiting the value of your Nvidia stock to 1% of your portfolio. At this allocation, Nvidia could fall dramatically, and your net worth would remain largely intact.
No. 3: What are my income requirements?
Nvidia pays a dividend, but it is not a good dividend stock. The dividend yield of 0.03% compares poorly to yields on cash savings accounts and many other S&P 500 stocks. For comparison, the average cash deposit rate in the U.S. is 0.43% and the average dividend yield of the S&P 500 is 1.24% as of Nov. 19.
If income is your primary investing goal, there are better options than Nvidia.
No. 4: Is Nvidia’s current price acceptable given its sales and earnings?
Nvidia's stock price is high relative to its historic sales and earnings. Investors buying Nvidia today largely believe the company's future earnings will justify the current price tag.
This is a common rationale for growth stocks, but it comes with risk. Stocks that trade at high prices relative to earnings can be volatile. The stock price moves higher on investor optimism but may fall quickly if earnings fail to meet future expectations.
If you prefer a safer approach, you could wait until Nvidia's price dips before you buy. As long as the decline is related to investor sentiment or a temporary circumstance, it should not affect the company's long-term potential.
No. 5: Do I understand and agree with the value proposition of AI?
The optimistic outlook for Nvidia relies on continued AI infrastructure spending. Multiple researchers and analysts believe the AI technology buildout still has years of growth ahead. However, research and advisory firm Forrester notes that "only 20% of businesses reported earnings benefits from AI in 2024," despite billions spent on AI infrastructure in 2023.
AI implementations must deliver returns, or the trajectory of spending on data center infrastructure will change. A spending decline could challenge Nvidia's efforts to meet investor expectations.
No. 6: Do I know about U.S. regulations on semiconductor exports?
The Department of Commerce has proposed new rules limiting the export of high-powered semiconductors and related technologies. The rules are intended to prevent foreign adversaries from developing technology that could threaten national security.
Meanwhile, the U.S. is enforcing its existing export restrictions. In November 2024, the Department of Commerce ordered Taiwan Semiconductor (TSM), a major supplier to Nvidia, to stop shipping high-powered chips to Chinese customers.
Existing and new semiconductor export restrictions limit Nvidia's opportunity in China, which is a sizable market. Statista estimates the Chinese chip sales totaled $185 billion in 2023.
If you intend to invest in Nvidia, plan on following these regulatory developments and evaluating their ongoing impact on the business.
No. 7: Do I understand who Nvidia’s competition is?
Advanced Micro Devices (AMD), a Nvidia competitor, is also targeting the AI chip market. In recent years, AMD CEO Lisa Su has raised the company's R&D budget dramatically and made a string of acquisitions to broaden AMD's AI resources and expertise.
AMD does not have a meaningful market share in AI chips today, but the company says its newest chip, the MI325X, is more powerful than Nvidia's H200. As a prospective Nvidia investor, you might consider analyzing a competitor like AMD to understand its capabilities and how they could affect Nvidia's prospects.
Nvidia also faces competition from the major cloud computing providers: Microsoft (MSFT), Alphabet (GOOG), and Amazon (AMZN). These tech giants are developing their own AI chips to avoid being overly dependent on Nvidia.
No. 8: What factors would prompt me to sell Nvidia?
It is always smart to define your sell parameters before buying any stock, especially the volatile ones. Sell triggers can be positive developments that push the stock price higher and create profit-taking opportunities. Or, triggers can be negative circumstances that permanently dampen the company's outlook.
Having documented sell triggers can discourage you from making an emotionally driven decision to liquidate. With Nvidia's history of price declines and recoveries, a rash decision to sell could leave you watching from the sidelines as the stock returns to growth.
Only you can decide if the risks associated with Nvidia stock are worth the rewards. Learn the business, know your risk tolerance, and choose a position size that makes sense. Remember that you can always add to your Nvidia holdings once you become comfortable with its behavior.
