Nvidia (NVDA +0.64%) stock soared 171% last year for the best performance in the Dow Jones Industrial Average, which it recently joined. The year was fantastic for the artificial intelligence (AI) chip giant. It entered this famous benchmark, reported record revenue, and readied the release of its new game-changing Blackwell architecture.
In recent days, though, Nvidia's momentum has screeched to a halt as the stock lost about 15% over the past five trading sessions. The reason for the drop? Chinese start-up DeepSeek announced it had trained its AI model for a fraction of the amount big U.S. tech companies have been investing. The idea is that maybe these Nvidia customers have been spending too much, and following the DeepSeek news, they may adjust their strategies and cut their investments.
Meanwhile, Nvidia is heading for its next big catalyst on Feb. 26, so you may be wondering if you should buy the stock before that date and potentially benefit from near-term and long-term gains. The evidence is piling up and here's what it shows.
Image source: Getty Images.
Nvidia's rise to fame
First, let's take a quick look at Nvidia's meteoric rise to fame in the AI market. The company historically was a top seller of graphics processing units (GPUs) to the video gaming industry, but as it became clear that the GPU could excel in other businesses, it created the CUDA parallel computing platform to help make that a reality.
Today, though Nvidia continues to serve the video game market, the company's biggest business is AI. It's data center unit makes up 87% of today's revenue, and revenue has reached records -- growing in the double-digits or triple-digits -- quarter after quarter. This is not only due to the GPUs that power the crucial steps of training and inferencing of models, but also to the company's entire ecosystem of AI products and services, from networking options to software.
All of this has helped supercharge Nvidia's stock performance as investors sought to get in on this high-growth player that's been leading in a high-growth market.
NASDAQ: NVDA
Key Data Points
Now let's consider the catalyst that's right around the corner: Nvidia is set to report fiscal fourth-quarter and full-year 2025 earnings on Feb. 26.
Earnings reports generally trigger some stock movement, based on whether the company reports good or bad news. In some cases, the company can deliver a positive report, but investors still may sell some shares to lock in their profits. So it's impossible to predict with 100% certainty what a stock will do following an earnings report.
Some clues about what's next
Evidence before us right now offers some clues about direction in the weeks and months to come and could help investors make a smart decision. The DeepSeek news may have initially seemed negative for Nvidia, but it's unlikely to change anything for the tech powerhouse. The company's latest chip has proven it's the fastest and most efficient -- and its top customers want the best for their projects. As a result, I'd be very surprised if they did an about-face and cut spending on premium chips.
In recent days, experts have cast doubts on the validity of DeepSeek's cost estimate. Analyst firm SemiAnalysis wrote that the GPU investment may have totaled more than $500 million -- a far cry from the less than $6 million DeepSeek announced. So I don't see the DeepSeek news as a long-term headwind.
On top of this, Nvidia has reached a big moment right now. The company is launching its new Blackwell architecture, and in this quarterly report on Feb. 26 will announce the first Blackwell revenue figures. Last quarter, it predicted this would be several billion dollars, suggesting this new platform will be a major revenue driver for the company in the months to come.
A positive environment for AI
It's also important to keep in mind that the general environment for AI is positive right now. The U.S. government and OpenAI recently announced a $500 billion project to build out infrastructure in the country and named Nvidia as a key partner. This is against the backdrop of an already growing market.
Analysts forecast today's $200 billion AI market may reach more than $1 trillion by the end of the decade. All of this shows us Nvidia's revenue growth opportunity is far from over.
So, should you buy Nvidia stock before the upcoming earnings report? The evidence I've talked about so far and one more element offer an answer. Today, after the recent declines, Nvidia stock is trading at 27x forward earnings estimates, its lowest level in a year, and it looks dirt cheap, considering all of the positive points I've mentioned above.
The answer, therefore, is yes. Right now, before Feb. 26, is a great time to get in on this top AI stock that could soar in the near term, but more importantly, over the long run.
