For Nvidia investors, last week’s sharp selloff likely caused some to exit their positions. But those who have persevered through this crisis may not have much reason to worry. Nvidia’s chart once again shows a clear buy point from a base.
Nvidia rose on Friday, extending Thursday’s gains after a sharp 13% selloff last week. Shares are on track to gain 10% this week. The stock is also trying to regain the 50-day moving average.
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On Wednesday, Nvidia entered into an agreement to purchase Run.ai. According to TechCrunch, the price is $700 million. Run.ai helps developers use AI tools more efficiently and reveals Nvidia’s roadmap and priorities. Run.ai partners with Nvidia’s cloud AI product, which helps companies get “instant access to an AI supercomputer through a browser.”
According to IBD MarketSurge, shares are forming a base with a buy point of 974. Meanwhile, investors await Nvidia’s May 22 earnings report.
Before this week’s rebound, Nvidia shares had given back gains from Nvidia’s GTC conference for AI developers in March. The stock saw a huge 239% increase in 2023. And despite last week’s decline, the stock is up 70% so far this year.
Bullish price targets from analysts for Nvidia shares
After the March conference, UBS analyst Timothy Arcuri raised Nvidia’s price target from 800 to 1,100 but maintained his buy rating.
Arcuri said after the launch of the Blackwell platform: “We believe Nvidia is on the cusp of an entirely new wave of demand from global enterprises and states – with each state potentially as large as a major US cloud customer.”
Ahead of the conference, Truist analyst William Stein increased his price target for Nvidia shares from 911 to 1,177. He sees stronger demand for Nvidia chips in 2024 and 2025. HSBC analysts also increased their price target from 880 to 1,050. Both Truist and HSBC maintained their Buy ratings on the stock.
Analysts at Bank of America also recently raised their price target from 925 to 1,100.
Nvidia shares: An outstanding fourth quarter
Nvidia delivered another top quarter in February. Earnings of $5.16 per share on revenue of $22.1 billion beat fourth-quarter expectations of $4.59 billion and $20.4 billion, respectively.
The company previously said the limited supply of AI chips was the biggest challenge to growth. Customers can also wait for the next-generation B100 chip, expected in the coming quarters. Baird analysts recently said that’s a good thing. B100 chips will have better performance and likely have a higher average selling price, analysts said.
The AI chip maker also disclosed its recent investments in several smaller artificial intelligence companies in a filing with the Securities and Exchange Commission.
Nvidia Stock’s Blockbuster Results
Nvidia’s current stock movement dates back to the end of 2023. At the time, shares broke out of a double-bottom base with a 476.09 buy point and strong volume ahead of third-quarter results in November.
A week before the results were released, Nvidia announced plans for a new artificial intelligence computing platform and an advanced data center chip at the SC23 supercomputing conference in Denver.
Despite a blockbuster quarter, shares fell after the earnings report but found support at the 50-day moving average. This allowed the stock to form a flat base with a buy point of 505.48. Earnings came to $4.02 per share, according to the company.
That corresponds to sales of $18.12 billion for the period ending October 29th. Analysts polled by FactSet had expected earnings of $3.37 per share on revenue of $16.19 billion.
Compared to the same quarter last year, Nvidia’s profits rose 593% while sales rose 206%.
The main reason was demand from data centers. Nvidia’s data center revenue rose 279% to a record $14.51 billion compared to the same period last year. Data center revenue also rose 41% compared to the end of the July quarter.
AI products drive growth
Nvidia has earned a reputation for being a pioneer. The company was an early pioneer in graphics processors, which many say dramatically improved computer games. In addition to gaming, Nvidia chips are now also used in industries such as healthcare, automotive and robotics.
In March 2023, generative AI took a leap forward with ChatGPT from OpenAI. According to Nvidia CEO Jensen Huang, Nvidia’s AI-enabled supercomputer paved the way for the “iPhone moment of AI.”
This helped Nvidia turn the tide on its results. The company reported three quarters of year-over-year declines in sales and four quarters of declines in profits. But then the company achieved record growth in sales and profits in the last two quarters.
According to a recent report from research firm Gartner, total global sales of AI chips will increase 26% from $53.4 billion in 2023 to $67.1 billion in 2024. By 2027, this value is expected to double to $119 billion
Nvidia’s graphics processing units help accelerate computing performance in data centers and AI applications.
Top ratings for Nvidia
The Nvidia share has the best possible value of 99 for both the Composite Rating and the EPS Rating. Its Relative Strength Rating of 97 also shows that it outperforms the vast majority of stocks in the Investor’s Business Daily database.
Nvidia is also among the “Magnificent Seven” stocks that led the stock rally in 2023. The other stocks are Apple (AAPL), Microsoft, Alphabet, Meta Platforms, Tesla and Amazon.com (AMZN). Some of these tech titans are customers who rely on Nvidia’s advanced chips. Nvidia is also among the stocks expected to outperform in 2024.
Nvidia stock currently ranks first in the fabless semiconductor group, which ranks a high 7th among IBD’s 197 industry groups. The AI stock frequently appears on the IBD 50, IBD Sector Leaders and Tech Leaders lists. Additionally, the stock is on the IBD Leaderboard.
Is Nvidia stock a buy?
The stock has a D- Accumulation/Distribution Rating. This shows that institutional investors have bought little in recent months.
Despite its many positive aspects, Nvidia stock is not a buy right now. If the stock decisively reclaims its 50-day moving average, an entry would be possible.
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