Prediction: NVIDIA is Going To Shoot Higher After Feb. 26th

Nvidia (NASDAQ:NVDA) is set to report earnings on February 26, and it can be a major catalyst for the AI chipmaker. Investors will get to see how much the business is growing and receive guidance for what future growth will look like.

While investor sentiment has been mostly lukewarm since market participants learned about DeepSeek, the dip presents an opportunity. Here’s why Nvidia can shoot higher after it reports earnings.

Nvidia Practically Has a Monopoly In the Fastest Growing Industry

Other companies also produce chips, but Nvidia is in a class of its own. We saw this when Advanced Micro Devices (NASDAQ:AMD) reported 24% year-over-year revenue growth in Q4 2024. That’s not bad, but Nvidia grows at a much faster rate, demonstrating how much the chipmaker has pulled away from the competition.

While the AI industry is the rising tide that lifts all boats, it’s no secret that Nvidia has received the biggest lift among the chipmakers. It also operates in the AI industry, which is projected to maintain a 36.6% CAGR from now until 2030.

The DeepSeek Reaction Made No Sense

Investors could argue that Nvidia was undervalued at $140 per share if they looked at the forward P/E ratio. The stock had a forward P/E ratio of 56 right before the DeepSeek news came out. High revenue and net income growth rates resulted in a lower forward valuation.

However, the DeepSeek market reaction may be the biggest benefactor of the year for long-term AI investors who bought on the dip. Nvidia now trades at a 28 forward P/E ratio, and that’s after the stock rallied by more than 10% from its DeepSeek lows. It’s still almost 10% below where it traded before the DeepSeek news.

The DeepSeek market reaction never made sense. Investors heavily trusted sketchy numbers about DeepSeek’s expenses without asking for any proof. Furthermore, DeepSeek is owned by a hedge fund which could have theoretically opened short positions in AI stocks like Nvidia right before the news went mainstream.

It’s also speculated that DeepSeek used Nvidia’s chips but couldn’t disclose that due to ongoing trade restrictions. Finally, any reduction in AI chip prices would result in booming demand, just like it did with computers. A computer used to cost well over $100,000 in the 1960s. Now, they’re much cheaper, and the computer companies are doing much better now than they were in the 1960s.

The AI Race Is Heading Up

It’s not just hyperscalers like Big Tech that are competing in the AI race. Countries like the U.S., China, and France have each announced multi-year AI investments. Each of those countries is willing to spend well over $100 billion during the next few years.

Since Nvidia practically has a monopoly on AI chips, they should receive a high percentage of these investments. While companies and countries can use cheaper AI chips, it’s very risky to do so at the current stage. Most businesses and governments wouldn’t want higher profit margins with inferior chips if it meant falling behind in the AI race.

Nvidia chips can also help businesses and countries save money on the operational costs of data centers. Nvidia CEO Jensen Huang brought this up in an interview and said, “Even when the competitor’s chips are offered for free, it’s still not cheap enough.” It reflects Nvidia’s value proposition in an AI race that is just getting started.

Blackwell Will Boost Sales

Nvidia’s Blackwell GPU is the largest one ever made, and it has received plenty of demand from big tech and other corporations. It’s going to be a major catalyst for Q4 earnings that investors shouldn’t overlook. There’s some speculation that Blackwell can generate $8 billion in the 4th quarter alone, and it’s already sold out for the rest of the year. That demonstrates the level of demand Nvidia commands for its chips.

Tailwinds for Blackwell can help Nvidia cruise past expectations and set ambitious goals for 2025. All of these factors suggest Nvidia stock can rally after it reports earnings on February 26.

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