Initially a graphics card company, Nvidia (NASDAQ:NVDA) has become a leader in AI chips under CEO Jensen Huang. Despite recent declines, Nvidia stock surged 116% in 2024 and 130% over the past 12 months.
With a 629% increase in earnings per share but correspondingly high valuation multiples, there are questions about where this stock is headed. That said, many growth investors still feel Nvidia stock is trading at a justified valuation, given these sky-high growth rates.
Others question whether future growth will come in as anticipated or if Nvidia has simply pulled forward a significant chunk of true demand to past quarters. We’ll have to see. However, the company’s Blackwell architecture remains promising, and there are several growth catalysts investors have to like on the horizon.
Indeed, many top tech stocks face short-term concerns, but Nvidia’s long-term prospects remain promising. Let’s dive into why this stock still looks like a buy ahead of earnings.
Analysts Are Still Bullish on Nvidia Stock
Barclays strategists have highlighted Nvidia’s upcoming Q2 earnings report on August 28 as a potential catalyst for large-cap tech stocks. With recent market volatility and concerns over AI spending, Nvidia’s results could influence the Big Tech landscape and investor sentiment about AI investments.
Barclays deemed the 16% drop in European tech stocks and the 30% decline in key players like ASML (NASDAQ:ASML) excessive. Investors largely re-entered European tech with an overweight position, favoring this sector’s long-term growth over struggling sectors like autos.
Recent market volatility, driven by leveraged trades and shifting yen rates, caused sharp pullbacks. Barclays expects yen weakness to resume if global rate cuts accelerate but sees the recent sell-off as overdone, presenting opportunities for long-term investors.
NVDA stock fell nearly 20% over the past month, but Mizuho sees significant upside ahead. Despite Blackwell chip delays, demand for Nvidia’s H100 and H200 remains strong. Analysts from Mizuho also raised Nvidia’s price target to $132, showing a 26% potential gain.
Other Wall Street analysts also believe Nvidia stock remains a strong buy, with a consensus average target price of $141.29 at the time of this writing. A number of top price target increases have been seen since May 2023 due to the company’s incredible surging demand and the popularity of Nvidia’s chips, which have led to strong earnings reports.
Blackwell Delays Are Just Small Hurdles
Nvidia is delaying its next-gen Blackwell B200 AI chips by at least three months, with mass shipments now expected in early 2025. The delay, caused by a late-stage design flaw, has led to a drop in Nvidia’s stock and broader AI investments. The company’s B200 chips were slated to replace the successful H100, which has significantly boosted Nvidia’s sales and stock.
Nvidia is testing new chips with Taiwan Semiconductor (NYSE:TSM) as several reports of delays continue to circulate. While Nvidia claims production is on track, a delay could impact its revenue and stock, affecting TSMC and rival Advanced Micro Devices (NASDAQ:AMD).
Citigroup was among the analysts who lowered their 2025 revenue forecasts for the company and removed Nvidia from its catalyst watch due to the delay. Despite these prospective delays, Nvidia’s Blackwell chips will maintain strong demand. Investors should view the current dip as a buying opportunity.
Weigh The Good and Bad
Concerns over Nvidia’s market dominance and potential delays in its Blackwell chips are valid but varied in impact. Despite competition and regulatory scrutiny, Nvidia remains a leader in AI chips. The U.S. Department of Justice is investigating Nvidia for alleged market abuses, and delays are possible due to design flaws.
CEO Jensen Huang had previously projected strong revenue from Blackwell this year. The threat of reduced sales to China, especially with potential political changes, adds risk. However, Nvidia’s valuation has stabilized below peak levels, and short-term demand for its chips remains strong, supported by ongoing AI investments from major tech firms.
Given ongoing tech volatility and strong demand for Nvidia’s AI chips, gradually buying Nvidia stock in August appears to be a solid strategy. This is a company that long-term investors have not regretted dollar cost averaging into over time.
Yes, there are potential headwinds for the stock here. But buying NVDA stock on dips has been among the most profitable things to do for a long time, and I don’t anticipate that will change soon.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor held a long position in NVDA.
