Should You Buy Nvidia Before November 19th?

Nvidia will report its third quarter earnings in late November.
In 2026, the company should continue to increase revenues.
This stock may be currently overvalued due to margin contraction.
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in 2023 Nvidia (NASDAQ: NVDA) crossed the $1 trillion market cap. Until 2024 it exceeded 3 trillion dollars. This year it has grown to become the largest company in the world with a current market cap of $5 trillion. Investors can’t get enough of the semiconductor company that’s driving the artificial intelligence (AI) revolution.

Nvidia continues to sign big deals with partners like OpenAI, keeping the semiconductor floodgates open. With the sector set to spend trillions of dollars in capital spending over the next few years, it looks like Nvidia will continue to grow its $165 billion. USD annual revenue, which has grown 1,000% over the past five years. Does this mean you should buy Nvidia stock before it reports earnings on November 19?

While Nvidia’s revenue grew to $165 billion. USD, the end-market demand for its high-performance computer chips looks poised to grow over the next few years. OpenAI, the world’s fastest-growing artificial intelligence company, will spend about $1 trillion on infrastructure over several years in various financing deals. It recently announced a $100 billion partnership with Nvidia.

As part of the deal, Nvidia will invest $100 billion. USD to OpenAI, which will turn around and use those funds to buy Nvidia computer chips. While this may sound like a circular funding deal for OpenAI, it could be a worthwhile investment for Nvidia to maintain customer relationships with a company that could one day be worth trillions of dollars.

Outside of OpenAI, big data center developers love it Amazon An estimated $550 billion will be spent on capital spending next year. USD, which would increase by 24 percent compared to 2025. If we take this as an example of spending on Nvidia chips, in 2026 we could again see strong revenue growth for Nvidia, with total revenue rising to around $200 billion. USD or more.

Image source: Nvidia.

in 2026 Nvidia’s revenue growth looks promising, but what about profits? If we look at the company’s income statement, there are indications that earnings may face some headwinds next year.

First, Nvidia’s profit margin is shrinking after 2023 and 2024. achieved a record. Gross profit fell to 70% and operating margin fell to 58% in the last 12 months. There may be more headwinds as shipments increase Taiwan SemiconductorIn factories in Arizona that cost more than Nvidia chips made in Taiwan. These costs can be added to the sales price that Nvidia buys from Taiwan Semiconductor, and if it cannot offset this with higher sales prices to its customers, Nvidia’s gross margin will continue to decline.

Second, competition from its customers for artificial intelligence chips is increasing. Meanwhile, Amazon is spending heavily on its custom-made Trainium computer chips Alphabet quickly increased the number of Tensor Processing Units (TPUs) used in place of Nvidia products. Increased supply to compete with Nvidia could lead to lower prices for Nvidia’s chips, which have been priced higher for years. This could return Nvidia’s operating margin to historic levels of 30-40%.

NVDA Gross Profit Margin Chart — NVDA Gross Profit Margin Data by YCharts

Analyzing Nvidia shares, it is quite clear that in 2026 revenue will grow at a high double-digit rate. However, considering the possibility of a margin squeeze, its revenue growth could fall well short of revenue growth.

Today, Nvidia stock trades at a bargain price-to-earnings (P/E) ratio of 54.5, the most expensive of all megacap technology stocks, excluding Tesla. The strong earnings ratio raises high expectations for Nvidia’s future revenue growth, which may not be met if margins continue to shrink.

For this reason, investors should avoid buying Nvidia stock after its third-quarter earnings report on Nov. 19. There are much better big tech stocks to buy for your portfolio today.

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Brett Schafer has no positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Nvidia, Taiwan Semiconductor Manufacturing and Tesla. The Motley Fool has a disclosure policy.

Should You Buy Nvidia Before November 19th? originally published by The Motley Fool.

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