Has Nvidia (NASDAQ: NVDA) finally run out of earnings surprises?
The high-flying AI chip superstar seemed to run out of gas in the fiscal 2025 second-quarter earnings report it released on Aug. 28. While the company beat estimates on the top and bottom lines, the differences were narrower than investors were used to, and guidance was also less impressive than some had hoped.
Additionally, the company reported its first sequential decline in gross margin since demand for its graphics processing units (GPUs) surged following the launch of OpenAI’s ChatGPT, a sign the chipmaker’s profitability has peaked.
Since then, Nvidia has continued to pull back, falling Tuesday on a report it was subpoenaed by the Department of Justice as part of an antitrust investigation. The company later said it had not received a subpoena.
Nonetheless, as of its close on Sept. 6, the stock was down 18% from where it was trading before the earnings report came out.
That sets up a potential buying opportunity for investors as the stock is now about as cheap as it’s been (on a valuation basis) since the AI boom began, trading at a price-to-earnings ratio of 49.
For investors considering buying the dip on Nvidia, the AI stock is well-positioned to recoup its recent losses in the fourth quarter and move higher. Let’s take a look at a few reasons why.
Image source: Nvidia.
1. The Blackwell launch could be huge
The launch of Nvidia’s new Blackwell platform has been eagerly awaited since the company announced it in March at its GTC conference.
The new GPU ecosystem has been delayed about three months due to a design flaw, but it’s expected to be ready to go in the fourth quarter. According to Nvidia, Blackwell is able to run generative AI programs and massive large language models at up to 25 times less cost and energy requirements than the earlier Hopper model. That could be a game-changer for the AI industry in the wide range of companies depending on Nvidia GPUs.
CFO Colette Kress told investors on the recent earnings call, “Demand for Blackwell platforms is well above supply, and we expect this to…
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