This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
Key Points
- Nvidia recently announced a slew of important deals and sales agreements that should ensure that its high revenues continue for a long time.
- The market has high expectations for its upcoming earnings report, but the GPU leader tends to beat expectations.
- Nvidia stock trades at a high valuation, but investors are willing to pay a premium due to the scale of its opportunities.
It was only July when Nvidia (NASDAQ: NVDA) smashed through the $4 trillion market cap mark, becoming the first company ever to do so. This week, the artificial intelligence (AI) giant surpassed $5 trillion in market cap, another worldwide first. After worrying investors earlier this year, Nvidia is back in the market's favor, and the stock is up 55% so far this year, crushing the market average.
As valuable as this company is today, though, there are many reasons to believe the stock can keep flying higher.
More data centers, more deals, more technology
It's hard to keep up with everything happening at Nvidia. The company is on fire, rolling out new products and forging new deals with partners and clients on an almost daily basis.
Here is just a sampling from this week: Nvidia announced a partnership with Uber, which will use its DRIVE AV Platform and DRIVE AGX Hyperion 10 Architecture to equip a fleet of autonomous vehicles that will complement its human-driven ridesharing cars. Nvidia's technology is a "reference compute and sensor architecture" that uses AI to sense the world around the car and operate it safely. Uber plans to begin scaling that self-driving fleet up toward 100,000 cars in 2027. That fleet's processing needs will further be supported by an AI factory (i.e., a massive dedicated data center) built on Nvidia's Cosmos platform.
Nvidia also announced a deal with Palantir Technologies to build a full-stack, integrated AI solution to manage complex operational AI processes. Palantir is a leader in AI data analysis systems, and this new project will streamline its platform for faster and better performance.
Not only will these deals be huge revenue drivers, they imply that there is a vast, long-term opportunity in the AI processing space, and Nvidia sits at the center of it.
Meanwhile, Nvidia continues to roll out new products to propel the AI revolution forward. It just debuted Omniverse DSX, which it describes as an "open blueprint for designing and operating gigawatt-scale AI factories." Nvidia is increasingly bringing out integrated AI products that bring all of the different steps together. This strategy aims for a faster and more seamless system to create more powerful generative AI solutions.
One reason the stock may have surged on Wednesday was that CEO Jensen Huang was in Washington, D.C., for the company's GTC conference, where he gave a keynote address and touched on opportunities in AI. He said that the company has already shipped 6 million Blackwell chips and has orders for 14 million more for delivery over the coming five quarters. The market likely gave a thumbs-up to the news that much of the production is happening in the U.S.
Nvidia has high expectations to meet in November
This is a great setup for Nvidia as it heads toward its earnings report on Nov. 19, but it will have high bars to clear, especially at its current stock price. Investors can feel some confidence given that Nvidia's results tend to beat expectations, but the pressure is definitely on.
In the company's fiscal 2026 second quarter (which ended July 27), sales increased 56% year over year, even though it was unable to sell its H20 chips to buyers in China during the period. The Trump administration has since eased those export restrictions, but Nvidia has not factored potential sales to China into its fiscal third-quarter revenue guidance. It's still guiding for sales of about $54 billion, 54% more than last year.
Its profits have been equally impressive. Fiscal Q2 earnings per share were $1.08, up from $0.67 in the prior-year period, and it has an impressive 61% operating margin.
As Nvidia stock keeps climbing, it's becoming more expensive in terms of valuation. At the current price, it trades at a price-to-earnings (P/E) ratio of 59. There are high expectations built into that price, but Nvidia is likely to come through. Investors are paying a premium because the opportunities for the company are massive.
Nvidia's growth rate will naturally slow down as the company gets bigger, but it should be able to keep investors happy as it continues to drive AI innovation. As long as you have some appetite for risk and can hold onto your shares through ups and downs, you can still comfortably buy Nvidia stock today.
This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
