Should Investors Buy Nvidia Stock Before the Company’s Q3 Results?

Graphics chip producer Nvidia (NASDAQ:NVDA) will report its third-quarter earnings at the end of this week.  The company delivered better-than-expected Q2 results, and Nvidia stock popped nearly 15% over the next two days. With another earnings report just days away, is now the time to invest in NVDA stock?

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NVDA Is Betting Big on AI

Graphics cards used in PCs — especially gaming PCs — remain the primary driver of NVDA stock. The cards accounted for over half of Nvidia’s Q2 revenue.

However, the company has been betting big on Artificial Intelligence. Specifically, NVDA is looking to leverage the massive parallel processing power of its GPUs to power the AI revolution.

Reports on AI tend to focus on areas like autonomous car technology and smarter personal digital assistants. Nvidia is working in those areas, but the company is also pursuing AI in other  fields, such as medicine. For example, last year the company partnered with Kings College London to deploy its Clara AI platform. Speaking about that partnership, Professor Sebastien Ourselin, the head of Kings College London’s School of Biomedical Engineering and Imaging Sciences said:

“This is a huge opportunity to transform patient outcomes by applying the extraordinary capabilities of AI to ultimately make diagnoses earlier and more accurately than in the past. This partnership will combine our expertise in medical imaging and health records with NVIDIA’s technology to improve patient care across the UK.”

NVDA is considered one of the big players in AI, along with companies like Amazon (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT) and Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google.

NVDA’s investments in AI have already begun to pay off; last quarter its data center revenue was $655 million. But its AI revenue is expected to ramp up with time, as companies and entire industries use AI more extensively.

How Has Nvidia Stock Performed Compared to AMD?

While NVDA is the longtime market leader in graphics cards, competitor Advanced Micro Devices (NASDAQ:AMD) has been getting a lot of the headlines this year. AMD’s latest Radeon cards  enabled the company’s  GPU market share to climb 10%  in Q2. AMD also won a contract to provide custom processors and GPUs for next-generation video game consoles from Microsoft and Sony (NYSE:SNE).

Nvidia stock is up nearly 59% on the year, compared to over 101% for AMD. According to most headlines, 2019 has been a bit of a banner year for AMD. NVDA, however, hasn’t exactly disappointed investors in 2019; it just hasn’t had quite the year that AMD has.

Should Investors Buy NVDA Stock Now

Nvidia stock is a solid, long-term investment. But much of the company’s potential top-line catalysts (especially in AI) won’t take hold for some time. CNN Business’ analysts are upbeat on Nvidia stock, but their 12-month median price target for the stock is $197.50, which is well below where NVDA stock is trading this morning. 

InvestorPlace’s Will Healy makes a compelling case that the current NVDA stock price already prices in the big gains from the company’s innovations. He suggests investing in alternatives like AMD stock instead. 

NVDA stock slid after its Q1 earnings and popped after its Q2 results. Is it going to beat expectations this week or disappoint investors? The company’s Q3 guidance wasn’t great, with its  projected revenue of $2.90 billion +/- 2% coming in below analysts’ average expectations.

Nvidia is a great company for investors’  portfolios, but at its current valuation, there is no rush to snap up Nvidia stock.   

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

Brad Moon has been writing for since 2012. He also writes about stocks for Kiplinger and has been a senior contributor focusing on consumer technology for Forbes since 2015.

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