There's no denying the growing chorus of experts suggesting that artificial intelligence (AI) will change just about everything. Some veteran analysts and tech aficionados have gone so far as to suggest we're in the throes of the fourth industrial revolution. These sophisticated algorithms have the potential to dramatically increase productivity by automating time-consuming processes and streamlining a great many tasks.
There are plenty of companies that have profited from the accelerating adoption of AI, but arguably none more than Nvidia (NASDAQ: NVDA). The company pioneered the graphics processing units (GPUs) that provide the computational horsepower that makes AI possible. Simply put, these computer chips can conduct lightning-fast mathematical calculations, which enables the creation and running of complex AI models.
There have been any number of catalysts that sent the chipmaker higher, and this Thursday could mark yet another. Let's look at what's coming down the pike and whether it could signal (another) big move for Nvidia stock.
The writing is on the wall
Taiwan Semiconductor Manufacturing (NYSE: TSM), commonly referred to as TSMC, is the world's largest contract semiconductor foundry and is responsible for the vast majority of AI chips, producing an estimated 90% of the world's most advanced processors. Nvidia ranks among TSMC's biggest customers, accounting for about 11% of the company's sales in 2023 -- though that number is likely higher now. As such, TSMC's performance will likely be a canary in the coal mine, providing insight into the trajectory of Nvidia's results.
TSMC is scheduled to release its third-quarter financial report on Thursday, and the available evidence suggests the results will be robust.
The company provides a monthly revenue report, so we already have a pretty fair idea of how things are going. For the three months ended Sept. 30, the company generated revenue of NT$759.7 million (roughly $23.6 million), which represents growth of roughly 39% year over year, based on current exchange rates. For context, that's slightly ahead of analysts' consensus estimates of $23.09 billion, or growth of about 35%. It's also ahead of TSMC's own forecast, which called for $22.8 billion at the midpoint of its guidance.
The fact that TSMC will likely surpass the high end of its own guidance suggests the demand for chips that process AI remains robust -- which bodes well for Nvidia.
There's more. Nvidia CEO Jensen Huang has been making the rounds on financial media, providing updates regarding the company's next-generation Blackwell architecture. "Blackwell is in full production, Blackwell is as planned, and demand for Blackwell is insane," the chief executive said in a recent interview. Analysts from Morgan Stanley are projecting that Nvidia will generate $10 billion from Blackwell chips during the company's fiscal 2025 fourth quarter, which ends in late January.
The available evidence suggests that demand for AI remains robust, and depending on what TSMC executives have to say on Thursday, it could potentially act as a catalyst for Nvidia -- but should investors buy the stock before Oct. 17?
Truth be told, it really doesn't matter much if you buy Nvidia stock before or after TSMC reports. The stock closed at a new record high on Monday, pushing Nvidia's market cap to $3.4 trillion, bringing its gains over the past year to more than 200% (as of this writing). Taking a step back, the stock is up 32,770% over the past decade, which helps illustrate the benefit of buying quality stocks and holding them for the long term.
To be clear, Nvidia already has plenty of growth built in. The stock is currently trading for 65 times earnings, which is enough to send some investors running for the exits. However, analysts' consensus estimates are calling for earnings per share of $4.04 in Nvidia's fiscal 2026, which kicks off in January. That works out to a forward multiple of 34, which suggests the valuation isn't as egregious as it first appears.
Furthermore, most experts believe it's still early days for the adoption of AI. The market value of generative AI is expected to be between $2.6 trillion and $4.4 trillion annually over the next few years. As new applications emerge and the technology advances, those estimates could well be conservative.
Given the company's pivotal position in the AI revolution and its robust growth prospects, it doesn't matter if you buy Nvidia stock before or after Oct. 17 -- as long as you buy it.
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Danny Vena has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.
Should You Buy Nvidia Stock Before Oct. 17? was originally published by The Motley Fool