Nvidia (NVDA +2.10%) was the market's go-to artificial intelligence (AI) stock for a time. Its data center products, including graphic processing units (GPUs), were in such high demand that it was hard to keep up with the company's soaring revenues.
Buyers piled into the stock, resulting in the price more than tripling in 2023 and nearly doing so again in 2024. But investors began diversifying into the sector last year, with names in memory chips and data center power suppliers attracting more attention.
Investors shouldn't count Nvidia out, though, especially now that the stock has flatlined over the past three months. I believe next month's earnings report from Nvidia will be a wake-up call. Here's why.
Image source: Nvidia.
Just do the math
Nvidia stock has hardly moved over the last three months. Year to date, it is up 8.75%, but that trails the Nasdaq-100 by nearly five percentage points.
The stagnation of Nvidia stock is somewhat understandable. Memory chip companies have seen sales and earnings soar, attracting significant investment capital from the tech industry. Investors are also anticipating the public debuts of AI model leaders Anthropic and OpenAI, and Space Exploration Technologies (SpaceX) just completed the largest initial public offering (IPO) in history. There's only so much capital to go around.
But that spells opportunity, and investors might want to act before the next catalyst from Nvidia.
Data source: Nvidia. Chart by author.
Nvidia's revenue growth has not only been stellar but also accelerating, driven by its data center segment. Management predicts fiscal second-quarter revenue will jump approximately 12% over Q1. Simply meeting that guidance would represent a 95% year-over-year increase. That's phenomenal growth for any tech company in the markets.
Nvidia is a safer bet
Nvidia isn't being valued as such a strong growth stock, though. Its forward price-to-earnings (P/E) ratio of about 22 is even lower than the Nasdaq-100 index's 25 P/E average. SpaceX isn't profitable yet, so P/E isn't a metric being used, but its price-to-sales (P/S) ratio is about four times that of Nvidia based on expected 2026 revenue.
While investors have been distracted by other growth and potential growth stories, Nvidia remains a known entity with promising prospects as far out as is reasonable to see. That's why it's not hard to predict that Nvidia's stock price will move higher after the company confirms its expected sales and earnings in August.
NASDAQ: NVDA
Key Data Points
That move higher might not happen right away. Or investors could push the stock up ahead of earnings. There's no way to know when, but it seems a good bet that Nvidia's share price will continue to rise as its financial results improve.
