NVIDIA (NVDA -2.25%) is set to report second quarter fiscal 2025 results (for the three months ended July 28) on August 28, and analysts are expecting another quarter of stellar growth for the company.

More specifically, LSEG Data & Analytics forecasts Nvidia’s revenue to increase 112% year over year to $28.6 billion. That’s slightly more than the midpoint of Nvidia’s $28 billion revenue forecast for the second quarter. However, LSEG data suggests that Nvidia’s adjusted gross margin may have declined compared to the fiscal first quarter due to the company’s investments in increasing manufacturing capacity.

If that’s true, Nvidia’s gross margin would fall below the 75.5% guidance for the second quarter. A slippage in Nvidia’s quarterly performance or the associated guidance could now lead to a drop in the stock price. If that is indeed the case, it could be a good idea for savvy investors to buy this semiconductor flagship company.

However, it cannot be ruled out that Nvidia’s results and forecasts will exceed expectations. In this article, we examine three reasons why investors should consider buying Nvidia shares before the results are released.

1. An attractive valuation makes the stock worth buying now

Nvidia’s high valuation has been a cause for concern in recent months, which is not surprising given the stock’s stunning rise since late 2022. However, a closer look at the stock’s multiples makes it clear that investors are getting a good deal on this up-and-coming chipmaker just before the release of its earnings report.

Nvidia currently trades at 48 times forward earnings. For comparison, the U.S. technology sector currently has an average earnings multiple of 46. The stock’s price-to-earnings-growth (PEG) ratio provides an even better gauge of how attractively Nvidia is currently valued. That’s because the PEG ratio is a forward-looking valuation metric calculated by dividing a stock’s trailing P/E ratio by the estimated earnings growth it could achieve.

A PEG ratio of less than 1 indicates that a stock is undervalued. By this metric, Nvidia stock appears to be extremely undervalued relative to its likely earnings growth.

NVDA PEG ratio data by YCharts

Therefore, Nvidia remains a safe bet for investors looking to add a growth stock to their portfolio right now, especially given the indications that the company could deliver better-than-expected results.

2. These AI hardware companies suggest Nvidia will deliver solid results

Earnings season is coming to a close, which means we can get a good idea of ​​the health of the AI ​​hardware market by looking at the results of other companies in this ecosystem.

For example, Nvidia’s foundry partner Semiconductor manufacturing in Taiwan (TSM -1.29%)popularly known as TSMC, reported a 33% year-on-year jump in revenue in the second quarter of 2024 (which coincided with two months of Nvidia’s second quarter). This was a significant jump from the 13% jump in revenue that TSMC achieved in the first quarter of the year. It is also worth noting that TSMC’s revenue in July grew 45% year-on-year, outpacing the growth of the first two quarters of the year.

TSMC has been working hard in recent months to increase its packaging capacity for advanced chips used to produce AI chips for Nvidia. The increase in TSMC’s quarterly revenue growth is therefore strong evidence of the robust growth in Nvidia’s revenue and profit, especially because Nvidia is TSMC’s second-largest customer.

However, TSMC is not the only AI hardware vendor that has seen a significant increase in revenue recently. Super-microcomputer (SMCI -8.27%)which makes AI server solutions used to assemble chips from chipmakers such as Nvidia, reported 143% year-over-year revenue growth in the fourth quarter of fiscal 2024 (ended June 30).

Supermicro attributed its phenomenal growth to “strong demand for next-generation air-cooled and direct liquid-cooled (DLC) rack-scale AI GPU platforms.” In addition, the midpoint of Supermicro’s revenue forecast for the current quarter is $6.5 billion, representing a 216% increase over the same quarter last year.

This, in turn, is an indication that Nvidia could be ramping up production of its next-generation Blackwell chips, which the company says won’t hit the market until later in 2024. Not only could Nvidia therefore deliver results that beat Wall Street’s expectations, but its forecasts could also prove solid and help the stock continue its stunning run.

3. The increase in capital spending by major technology companies is good news for Nvidia investors

Technology titans like Microsoft, Meta-platforms, alphabetAnd Amazon have increased their capital expenditures (capex) to strengthen their AI infrastructure. For example, Microsoft’s capital expenditures rose 75% year over year to nearly $56 billion in fiscal 2024. The company expects to increase its capital expenditures again in the current fiscal year to spend money on building more AI services and position itself for long-term growth.

Alphabet, on the other hand, could end the year with capital expenditures of around $50 billion as the company plans to continue pouring money into servers and data centers. That would be a significant increase from last year’s capital expenditures of $32 billion. Even Meta has raised its 2024 capital expenditure forecast to $37 billion to $40 billion from $35 billion to $40 billion. The social media giant’s capital expenditures in 2023 were $28 billion, and the company expects its capital expenditures to continue to rise through 2025.

Investors should note that all of these companies were Nvidia customers, buying the company’s chips to train and deploy AI models. Better yet, they will also adopt the chipmaker’s next-generation Blackwell processors, and Nvidia expects demand for these new chips to outstrip supply well into 2025. This potential spending could keep the company afloat for quarters and even years to come.

Overall, there is enough evidence that demand for Nvidia’s AI chips remains strong, allowing the company to deliver results that exceed consensus estimates and could exceed expectations. If that happens, Nvidia shares could see another leg up. That’s why it might be a good idea for long-term investors to buy this AI stock before it potentially rises even further after August 28.