History Says This Is What Happens to Nvidia Stock in September

During its fiscal 2027 second quarter (ended July 26), Nvidia (NASDAQ: NVDA) reported a year-over-year revenue gain of 106% to $96.2 billion. Diluted earnings per share soared 128% to $2.46. These two headline figures came in ahead of Wall Street estimates. Shares are up 8% since the announcement (as of Aug. 28).

Nvidia remains the dominant artificial intelligence (AI) enterprise. And the latest numbers support the claim that demand for its data center chips isn't softening. Investors that were bearish have lost out on big gains.

But history says that the month of September could be a down period for this AI stock.

Image source: The Motley Fool.

Past data doesn't support a huge gain in September

September is historically a weak month for the S&P 500 index. Over the 10-year period from 2016 through 2025, the closely watched benchmark posted an average loss of 1.3% in September. This didn't prevent the index from posting a fantastic total return during that time.

Nvidia tracks similarly. Over the same period (2016 through 2025), the technology stock's price declined an average of 0.8%.

Investors should come away with no clear takeaway. It's impossible to predict how Nvidia shares will perform in September. The business continues to operate at full strength from a fundamental perspective. This momentum can lift the stock price.

However, inflation remains a problem for the economy. And there's still a chance that the Federal Reserve raises the Fed funds rate before the year ends. This could pressure the equity market's performance as investors adopt a downbeat view of the tighter monetary policy.

Set a five-year time horizon

It's so easy for investors to get caught up in the short term. There is a constant flood of information. While paying attention to these things can make you feel very knowledgeable about the companies in your portfolio or on your watch list, it distracts from what really matters.

Spend less time thinking about what September will bring. Instead, focus your attention on the next five years. This is the correct time horizon to adopt before deciding whether to buy a particular stock.

Nvidia shares soared 901% in the past five years. Given that it's now a $5.5 trillion company, I don't believe it's realistic to expect a similar return over the next 10 years.

But that doesn't mean investors should completely disregard the stock. There are some very compelling bull-case arguments to look at.

Nvidia's growth continues to be exceptional. And sell-side analysts believe the top line will expand at a 58% yearly rate between fiscal 2026 and fiscal 2029.

This is one of the most profitable enterprises on Earth. A supply-and-demand imbalance, resulting in sustained pricing power, supported a 62% net profit margin in the second quarter.

After such a jaw-dropping performance, you might initially assume the current valuation is expensive. This is far from the truth, though. Investors can buy this "Magnificent Seven" stock at a forward price-to-earnings (P/E) ratio of 23.9. This is only a 14% premium to the S&P 500 index.

This setup makes Nvidia appear like a no-brainer buying opportunity. The financials are impressive. And the valuation is attractive.

But the best investors put in the effort to understand the risks. Any business that was registering the revenue growth and profitability that Nvidia was would likely command a valuation that's a significant premium to the benchmark index. The market must be worried about something.

I believe the chief risk relates to the durability of the AI infrastructure build-out. On the Q2 2027 earnings call, Chief Financial Officer Colette Kress mentioned that the five top hyperscalers will spend $1.3 trillion on capital expenditures in 2027.

These is an exciting forecast. However, there is a chance that this spending boom slows sooner than the bulls hope. A lot of capital is riding on AI delivering product and service innovation and new economic activity. If it fails to deliver on its promise, you can bet that money flowing to AI labs, hyperscalers, and the chip sellers will take a hit.

This risk should not be ignored even though it's still worth taking a chance on Nvidia shares right now.

Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.