Adoption of artificial intelligence (AI) continues apace, but some are waiting for the other shoe to drop. A strengthening US economy and strong quarterly results from many AI-related companies Nasdaq Composite It reached a new record last week. But the same factors are causing some investors to wonder whether the bull market has gone too far, too fast.

Nvidia (NVDA 1.99%) has become the de facto standard bearer for. productive artificial intelligence industry. The company is scheduled to report fiscal 2025 third-quarter results in less than three weeks, and it’s no exaggeration to say that Wall Street is eagerly awaiting the clues the report will offer about the state of AI adoption. Nvidia’s sales have increased since the beginning of last year, causing shares to rise 833% (as of this writing). It’s also down less than 5% from its all-time high reached late last month.

There’s a lot of developments surrounding Nvidia’s upcoming financial report, and many shareholders are wondering whether the stock can continue its breathtaking rise. Is it worth buying shares ahead of its financial report on November 20? Fortunately for investors, data is starting to accumulate that could help answer this question.

Image source: Getty Images.

Sunshine on a cloudy day

The key to Nvidia’s astonishing success over the last few years has been performance. graphics processing units (GPUs)These are the best chips for delivering the specific type of computational horsepower needed for generative AI and other cloud computing needs. The required resources and the sheer size of the data involved limit high-end AI models to the world’s largest technology companies and cloud providers, many of which are Nvidia customers. Commentary in conjunction with these tech giants’ latest quarterly results provides some insight into the state of the AI ​​revolution, and the evidence is clear.

For example, Microsoft (MSFT 0.99%) It said it was spending heavily to advance its AI agenda in the first quarter of fiscal 2025 (ending Sept. 30). There was a company capital expenditures (investment expenditures) $20 billion went mainly to support “cloud and AI-related” demand. CFO Amy Hood expects Microsoft’s spending spree to continue: “We expect capital spending to increase sequentially given our cloud and AI demand signals,” she said.

During Alphabet‘s (GOOGL 0.10%) (GOOG -0.02%) “Realizing the AI ​​(opportunity) … requires meaningful capital investment,” CEO Sundar Pichai said on the third-quarter earnings call. The company announced $13 billion in capex during the quarter and touted “significant increases in capital investments as we move into 2025.”

When we add up the three major cloud providers Amazon (AMZN 6.19%). During the third-quarter earnings call, CEO Andy Jassy called productivity a “perhaps once-in-a-lifetime opportunity…we’re aggressively pursuing it.” CFO Brian Olsavsky put this in context by saying Amazon’s capex will reach about $75 billion this year, with most of that going to cloud computing and AI infrastructure. The company also said it will unveil “100 new cloud infrastructure and AI capabilities” at AWS re:Invent later this month.

Finally, there is Meta Platforms (META -0.07%). Although not a cloud provider, the company’s social media sites attract 3.29 billion people every day and provide Meta with a huge amount of user data. Stating that the company increased its full-year capital expenditure outlook to approximately $39 billion, CFO Susan Li said, “We continue to expect a significant increase in capital expenditures in 2025.” It has previously stated that this is to “support our AI research and product development efforts.”

Why is it important?

The trend to accelerate capital spending to support growing AI demand is clear. Additionally, much of this money will be spent on data centers and servers required for cloud computing, where most productive AI software is located. Therefore, Nvidia will likely be the recipient of much of this spending.

Nvidia has historically been quiet about its biggest customers, but that hasn’t stopped Wall Street from doing some digging. Analysts from Bloomberg and Barclays Research crunched the numbers and concluded that Nvidia’s four largest customers, accounting for a combined 40% of its sales, are:

• Microsoft: 15%
• Meta Platforms: 13%
• Amazon: 6.2%
• Alphabet: 5.8%

Each of these companies has left no doubt about their capital expenditures, particularly their plans to spend heavily on infrastructure to support cloud computing and artificial intelligence ambitions. Nvidia, the leading provider of data center GPUs, will likely continue to be at the top of the list of beneficiaries of this spending.

Mark your calendar

Nvidia will report its next quarterly results on November 20. The company, which has achieved three-digit annual growth for five consecutive quarters, tried to rein in market expectations by suggesting that revenue growth would increase this time. It will only work about 79% of the time. While this may be a slowdown, there will still be remarkable growth by any stretch of our imagination.

Investors looking to make money in the next three weeks may be disappointed. No one can say for sure how Nvidia shares will react to the report, even if the company beats expectations.

For a reminder of the difficulties of making short-term forecasts, investors need only look back to this summer, when Nvidia shares lost up to 27% of their value starting in mid-June on fears that the next-generation Blackwell AI would break. processors would lag, but they would come back quickly. This was an example of how volatility is part of the cost of entry in this stock. However, both comments from major tech customers and historical spending patterns suggest Nvidia is poised for even stronger growth ahead.

For investors looking for stocks they can hold for years and decades rather than weeks and months, Nvidia is an obvious choice to benefit from the AI ​​revolution. It’s still attractively priced, though it’s trading at roughly 32 times next year’s earnings. I can’t say for sure what the stock will do between now and November 20th. What I can say with fair confidence is that investors Buy Nvidia shares soon, and if they get to keep it for three to five years or more, they’ll be very glad they did.