Nvidia (NVDA) rebounded 3% on Thursday, adding to Wednesday’s positive action when the stock found support at the 50-day moving average. The stock is on track for a three-day winning streak on Friday. But should you be buying Nvidia stock now?
The stock is 8% above its 50-day moving average and 11% below the split-adjusted all-time high of 140.76 after rising 4.6% last week.
Timing your stock purchases can surely improve gains. Yet even with an obvious market leader like Nvidia, it’s not easy to tell whether you should buy or sell the stock now. Chart signals and checking technical measures can help investors assess whether Nvidia stock is a buy now.
artificial intelligence revolution, and now its high-powered computing platforms are disrupting the health care industry in a big way. Harnessing the power of AI, the Magnificent Seven company could be just what the doctor ordered for the medical sector. Now Nvidia is applying AI technology for health care innovations, from drug discovery to medical diagnostics.” vid-name=”How Nvidia Is Injecting AI Into The Health Care Industry” vid-cat=”Industry Insights” vid-date=”08/01/2024″ vid-date-tmsp=”1722514161″ vid-image=”https://www.investors.com/wp-content/uploads/2024/08/Ts0Cro9u-640×360.jpg” vid-authors=”MEREDITH HEYMAN”>
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How Nvidia Is Injecting AI Into The Health Care Industry
Shares are rising after chief executive office Jensen Huang’s comments that demand for its next-gen Blackwell chip was “insane” as tech titans Microsoft (MSFT), Meta (META) and others build data centers.
Shares also headed higher amid news that the AI chip leader has invested $100 million in OpenAI. Nvidia’s chips power large-language models like ChatGPT. According to The Wall Street Journal, Nvidia will have the option of withdrawing its investment if OpenAI does not convert to a for-profit company in two years. Microsoft (MSFT) and Tesla‘s (TSLA) Elon Musk were early investors in OpenAI.
The stock fell 2% last Friday after reports from Barron’s that China was trying to boost local AI chip makers and urging local companies to avoid Nvidia chips. China accounted for 11% of Nvidia sales in the first half the fiscal year ending in January.
Nvidia Stock: AI’s Total Addressable Market
On Wednesday last week, shares rose after consulting firm Bain said the total addressable market for artificial intelligence hardware and software will grow 40% to 55% for at least next three years. Demand for Nvidia’s next generation graphic processing units GB200 is expected to reach 3 million in 2026 vs. 1.5 million for its H100 units in 2023.
According to Barron’s, Nvidia last week lost its place as the best performing S&P 500 stock so far this year. Vistra (VST) had gained 190% year to date as of Monday’s closing price last week, whereas Nvidia was up 135%.
But Nvidia stock rose last Monday after news that China e-commerce behemoth Alibaba (BABA) will collaborate with Nvidia to improve autonomous driving technology for Chinese EV manufacturers, several of which are rivals to Tesla (TSLA). Alibaba’s portfolio of large-language models are now integrated with Nvidia’s drive platform for autonomous vehicles.
On Monday last week, analysts at Melius Research gave the stock a price target of 165 with a buy rating as the company ramps up its Blackwell chip production in the fourth quarter.
White House Meeting
In September, shares climbed above the 50-day moving average amid news that Nvidia and OpenAI chief executive officers, Jensen Huang and Sam Altman, met officials at the White House to discuss AI infrastructure spending. According to reports, Alphabet (GOOGL), Amazon.com (AMZN) and Microsoft (MSFT) executives were also present. The White House announced an interagency task force to accelerate permissions for setting up data centers.
However, news that companies may be diversifying and looking for other chips besides Nvidia’s likely weighed on Nvidia stock. According to Barron’s, Saudi oil behemoth Aramco is planning on using chips made by a startup Groq to offer “AI computing power to local companies.”
The news followed Huang remarks that the return on investment for artificial intelligence infrastructure plays like Nvidia remained strong since “infrastructure players like ourselves and all the cloud service providers put the infrastructure in the cloud, so that developers could use these machines to train the models, fine-tune the models, guardrail the models, and so forth.”
Analysts at Bernstein said that after its phenomenal growth, sustainability is the main question Nvidia faces, but the “time to worry is clearly not now.”
On Sept. 3, Nvidia fell sharply below the 50-day moving average and saw its largest one-day market cap loss for any U.S. company, according to Dow Jones Markets Data.
Earnings From AI Giants
Results from other AI leading companies have influenced the stock. Last week, memory chip maker Micron (MU) cited robust AI demand, which gave Nvidia stock a lift.
Oracle (ORCL) results showed strong demand for AI chips. According to the Chairman and Chief Technology Officer Larry Ellison, Oracle is building a data center with “acres of Nvidia GPU clusters for training large language scale AI models.”
In early September, results from Broadcom (AVGO) weighed on Nvidia stock. Broadcom’s sales and earnings beat estimates but its sales outlook disappointed.
Shares also came under pressure amid news that the Department of Justice was investigating antitrust regulations concerning the artificial intelligence chip company. According to reports, the DOJ originally sent questionnaires to the company. But it has now sent subpoenas.
Shares fell 6.4% after earnings on Aug. 28 even though Nvidia beat analyst estimates.
Nvidia’s Second-Quarter Results
In August, Nvidia reported earnings that beat Wall Street views. Sales of $30.04 billion were higher than $28.7 billion analysts expected and came in 122% ahead of the year-earlier quarter. Earnings also came in above views of 65 cents at 68 cents per share and were 152% higher than the prior year. The artificial intelligence chip leader also guided higher for the current quarter with sales of $32.5 billion vs. views of $31.7 billion.
Earnings have moved Nvidia stock in 2023 and 2024 and that is shining proof of why fundamental performance is one of the pillars of the Investor’s Business Daily methodology. In 2023, Nvidia had a huge 239% run.
After losing 5.3% in July, the stock gained 2% in August. It gained 1.7% in September and is up 150% so far this year.
Fundamentals make up just one of four IBD pillars of investing — the others are a stock’s technical strength, which indicates the stock’s performance vs. other stocks, the market direction and risk management.
In early August, the stock dived amid a report that Nvidia will delay its next-generation AI chip by at least three months due to a design flaw. Nvidia’s chart also shows that the stock underperformed the S&P 500 during the sell-off.
Reuters cited Bernstein analyst Stacy Rasgon’s opinion that the three-month delay would not cause a significant dent on the chip leader’s market share.
Nvidia stock holds an Accumulation/Distribution Rating of E on an A+ to E scale. That reflects the heavy institutional selling in recent weeks.
Huang sold $580 million of Nvidia stock from June 14 through Aug. 9, based on a trading plan.
AI Products Drive Growth
Nvidia’s graphic processing units help accelerate computing in data centers and AI applications. The company was an early pioneer in the graphics processors that many say drastically improved computer gaming. Along with gaming, Nvidia chips now are used in such industries as health care, automobiles and robotics.
In March 2023, generative AI took a leap forward with OpenAI’s ChatGPT. According to Huang, Nvidia’s AI-capable supercomputer paved the way for the “iPhone moment of AI.”
That helped Nvidia turn the tide on its results. It reported three quarters of declining year-over-year sales and four quarters of tapering earnings in late 2022 and early 2023.
But then the company achieved record top- and bottom-line growth in the five most recent quarters.
Top Ratings For Nvidia Stock
Nvidia stock still boasts a strong Relative Strength Rating of 97 from Investor’s Business Daily. Its three-month RS Rating is 66, however.
Its EPS Rating is an ideal 99, while the stock holds a Composite Rating of 99 as well. The stock is also on IBD Leaderboard and the growth IBD 50.
Nvidia is one of the Magnificent Seven stocks that led the market in 2023 and much of this year.
Is Nvidia Stock A Buy?
Nvidia rebounded from its 50-day moving average on Wednesday and is starting to get extended from that buy level. Investors may also want to wait until volume picks up. It’s been running below average for a few weeks.
Nvidia also offers a trendline entry around 128 and a proper buy point of 140.76, which is its all-time high.
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Read More: Nvidia Stock Rebounds From Key Level; Is Nvidia A Buy Now?Investor’s Business Daily