Nvidia (NVDA +2.59%) soared over the past two years, but in recent weeks, it's offered investors a fresh buying opportunity that some may have never believed possible. After all, the artificial intelligence (AI) chip giant's earnings have been climbing, and the AI market is set to reach into the trillions by the end of the decade. And all of this should support more gains for Nvidia's stock price.
But general concerns about the economy, spurred by President Trump's plan to impose tariffs on imports, weighed on Nvidia -- and the overall stock market. Investors also worried about export restrictions that recently halted Nvidia's sales of chips to China. As a result, Nvidia stock fell as much as 29% from the start of the year through its lowest point last month. It's since started to rebound but still remains at a very reasonable price in relation to forward earnings estimates.
Now, investors are wondering how long it might stay at that price -- especially with a big potential catalyst coming up on May 28. I'm talking about Nvidia's quarterly earnings report, a moment that generally offers us important updates and a glimpse into what's ahead for this industry mover and shaker. This is particularly important these days, as concern remains about the impact of potential tariffs on electronics and on the future of chip exports.
Should you buy Nvidia before this key date? Let's find out.
Image source: Getty Images.
Nvidia's sales and profit
It's important to note that Nvidia has wowed investors quarter after quarter with its earnings growth and product updates and plans. The company has reported double- or triple-digit revenue growth, and that revenue has each time reached new records. At the same time, profitability on sales has been fantastic, with gross margin consistently above 70%. And even during the costly time of a product launch -- I'm talking about the recent release of the Blackwell architecture and chip -- Nvidia has managed to maintain gross margin above that level.
Meanwhile, the company marches forward with its emphasis on innovation, outlining its plans to release chip and/or full architecture updates on an annual basis. Blackwell Ultra will arrive in the second half of this year, followed by the Vera Rubin architecture in the second half of next year. This should keep Nvidia in its leadership position in the AI market.
NASDAQ: NVDA
Key Data Points
Finally, in recent weeks, Nvidia has demonstrated its ability to manage challenges such as tariffs or export restrictions to China. For example, to minimize impact of potential tariffs on electronics products, Nvidia announced a major investment in manufacturing in the U.S. The company's goal is to fully produce AI supercomputers in the U.S. -- today, most manufacturing happens in Taiwan, so this represents a major shift.
Proactive and resourceful
As for the China situation, Nvidia is looking to build a research and development center in Shanghai, according to a Financial Times report. The idea would be to develop designs to suit the needs of Chinese customers while respecting the stringent requirements of U.S. export controls, according to the newspaper. So, Nvidia is showing itself to be proactive and resourceful when faced with challenges.
Now, what should you expect on May 28? Nvidia has a long track record of beating analysts' expectations, and in the recent earnings report the launch of Blackwell was going strong -- with the product generating $11 billion in revenue during its first quarter on the market. Investors already know that Nvidia will be taking a $5.5 billion charge after the U.S. further restricted exports to China -- so that specific element shouldn't perturb sentiment.
Still, in spite of Nvidia's moves to manage the export and tariff issues, these risks do remain and could weigh on stock performance at any moment. And any setbacks in the tariff agreement process between the U.S. and China or the U.S. and other countries as well as any weaker-than-expected economic data represent potential headwinds for the stock. Nvidia depends heavily on the financial health of other big tech giants and their ability to spend on AI infrastructure.
Nvidia's valuation
Considering all of this, should you buy Nvidia before May 28? Nvidia is trading for 30 times forward earnings estimates, higher than it was a few weeks ago. But it's still much lower than its peak last year and this year, making it very reasonably priced today.
NVDA PE Ratio (Forward) data by YCharts
It's possible that positive earnings news will lift the stock and valuation, but I wouldn't expect a dramatic move in valuation that would immediately push it into overvalued territory. And though potential risks to near-term growth exist, as mentioned, in my opinion, Nvidia's positive long-term prospects are far stronger.
So, Nvidia is a buy, but whether you make the move today or after May 28 it won't make a huge difference for your eventual returns -- if you invest for the long term. That's because this hot stock may get even hotter as the AI story enters its next chapters, meaning that even if it stagnates or falls at a certain point, over time, Nvidia stock could offer your portfolio a significant boost.
