Should You Buy Nvidia Before Nov. 19? A Data Analyst's Take
Nvidia's been the darling of Wall Street, and frankly, it's easy to see why. The article in question asks whether you should buy Nvidia before November 19, hinging on the idea that third-quarter earnings for fiscal year 2026 (yes, 2026) will be a catalyst. Before diving into that, let's look at the bigger picture.
Nvidia's jump from gaming GPUs to AI dominance is a classic case of identifying a parallel application. They built CUDA, expanded the use cases of GPUs, and then tailored them to AI. The numbers don't lie: a 1,400% increase in share price over three years. That’s the kind of return that makes even the most seasoned investor raise an eyebrow. But past performance is, as they say, no guarantee of future results.
The article highlights Nvidia's commitment to annual GPU updates and a roadmap through 2028, with potential sales reaching half a trillion dollars from current and upcoming systems through 2026. Half a trillion. That's a big number (specifically, $500 billion). But orders are not revenue. It's a crucial distinction. Orders can be canceled, delayed, or reduced. We need to see those orders translate into actual revenue before popping the champagne.
Earnings and Expectations
Nvidia has a track record of exceeding analysts' estimates. The article points to strong demand reported by Taiwan Semiconductor Manufacturing (Nvidia's chip manufacturer) and Nvidia customers like Alphabet as reasons for optimism. This is where I start to get a little skeptical.
While it's true that Nvidia has consistently beaten estimates, relying on second-hand data from suppliers and customers is inherently risky. It's like trying to predict the winner of a horse race based on what the stable boy and the jockey's mother are saying. Useful maybe, but not definitive.
The core question is whether to buy before November 19. The article's author argues that it's not necessary to rush, as long-term performance will likely be the same regardless of short-term fluctuations. I generally agree with this sentiment. Trying to time the market is a fool's errand for most investors.
I've looked at hundreds of these analyses, and what stands out is the valuation argument. The author notes that Nvidia is trading at about 44 times forward earnings estimates, which isn't cheap but is "reasonable" given the growth story. "Reasonable" is doing a lot of work in that sentence. What's "reasonable" depends entirely on your risk tolerance and investment horizon.
A more conservative investor might see a P/E ratio of 44 and run for the hills. A growth-oriented investor might see it as a bargain, betting that Nvidia's future earnings will justify the current valuation.
The author also brings up the point that Nvidia traded at just over 20 times forward earnings earlier this year during a tech stock decline. This is an important data point. It tells us that Nvidia's valuation is highly sensitive to broader market conditions. If there's another tech sell-off, Nvidia's stock could take a hit, regardless of its underlying performance.
A Case of Overhyped Optimism
The author considers Nvidia a buy for the long term, but not necessarily before November 19. I'd add a significant caveat: only if you're comfortable with a high level of risk. The AI boom is real, but the market is forward-looking. Are we potentially seeing a bubble?
The question isn't just whether Nvidia will continue to grow, but whether that growth will be faster than what's already priced into the stock. Forty-four times forward earnings is a steep price to pay, and it leaves little room for error. If Nvidia misses earnings expectations, even slightly, the stock could get hammered.
Still Just a Casino?
Nvidia remains a high-growth, high-risk stock trading at a premium valuation. The potential rewards are significant, but so are the risks. The article’s analysis is sound, but a bit too optimistic, in my view. You can read the original analysis in "Should You Buy Nvidia Before Nov. 19?".
