Nvidia Corporation (NVDA), renowned for its prowess in gaming and data centers, is energizing the market with its advancements in artificial intelligence (AI). With its earnings report on the horizon this month, investors are contemplating whether Nvidia’s stock is a strategic buy at this juncture.
Semiconductor and AI Developments
Nvidia stands at the forefront of the AI chip industry, yet the landscape is becoming increasingly competitive. Notably, key client Microsoft (MSFT) is rumored to be developing its own AI chip, while OpenAI, supported by Microsoft, is also venturing into AI chip production.
Recent reports, including an October 31st article from The Wall Street Journal, highlight new U.S. restrictions on AI chip sales to China, potentially leading to up to $5 billion in lost orders for Nvidia.
Companies like Nvidia are harnessing the burgeoning generative AI market, which boasts the ability to craft content and write code based on extensive data analysis.
With eyes set on Nvidia’s fiscal third-quarter earnings report due on November 21, investors are considering if NVDA ranks among the top large-cap stocks for their portfolios.
Nvidia Stock Technical Assessment
NVDA shares have seen a buoyant start to November, propelled by the Federal Reserve’s decision to maintain interest rates. MarketSmith analysis suggests a new buy point for Nvidia at 476.09, stemming from a double-bottom base, with the stock currently hovering just below this threshold.
Nvidia’s stock rebound is a turnaround from its October descent, with the stock now surpassing the 50-day and 10-week moving averages.
Despite a challenging 2022, NVDA has witnessed a remarkable 213% surge year to date, demonstrating resilience, particularly when compared to broader growth stocks during market downturns.
IBD Leaderboard inclusion came after Nvidia’s earnings gap up in February, bolstered by AI-driven earnings and a promising outlook from May to August, culminating in a record high.
The relative strength line has leveled, indicating Nvidia’s current pace is in step with the overall market. This line is depicted in blue on the provided chart.
With an IBD Composite Rating of 99, NVDA is positioned in the top echelon — the leading 1% of stocks based on technical and fundamental metrics. Investors typically favor stocks with Composite Ratings above 90, and Nvidia is a frequent contender on IBD’s 50, Big Cap 20, and Sector Leaders rosters.
Nvidia’s Financial Performance
Nvidia’s EPS Rating stands at 93 out of 99, and its SMR Rating holds an A grade, evaluating sales growth, profit margins, and return on equity.
On August 23, Nvidia outstripped projections with its earnings report, propelled by its data-center business.
Comparatively, Nvidia’s earnings skyrocketed by 429% in Q2, with sales doubling year over year.
Data-center revenue, including essential A100 and H100 AI chips, saw a 171% increase, vital for AI applications.
Nvidia’s third-quarter sales forecast suggests a 170% surge to $16 billion.
Full-year projections anticipate Nvidia’s earnings to rebound by 221%, with sales expected to climb by 103%. This follows a 25% dip in earnings per share the previous year.
Out of 51 analysts covering NVDA, 49 advocate a buy, three suggest a hold, and none recommend a sell, per FactSet data.
Nvidia’s Competitive Edge and Rivals
As a trailblazer in GPUs for video gaming, Nvidia is expanding its reach into AI chips for supercomputers, data centers, and pharmaceutical development.
Nvidia’s GPUs complement CPUs from other manufacturers and are pivotal in the development of “supercomputers” that amalgamate Nvidia’s CPUs and GPUs.
Additionally, Nvidia’s technology is instrumental in Bitcoin mining and autonomous electric vehicles, and it’s aggressively pursuing metaverse applications.
Peers in the fabless chip sector include Qualcomm (QCOM), Broadcom (AVGO), and Monolithic Power Systems (MPWR), with this group ranking 34th out of 197 industry groups.
Investors often reap the best returns from market and industry leaders.
Is It Time to Buy Nvidia Stock?
Fundamentally, Nvidia is primed for explosive growth, with earnings set to more than triple this fiscal year, propelled by robust chip sales for data centers and AI initiatives.
The company is branching out into burgeoning sectors, including autonomous electric vehicles, cloud gaming, and the metaverse.
However, the broader economic and geopolitical landscape carries uncertainties, ranging from trade tensions between the U.S. and China to geopolitical conflicts.
NVDA has staged a remarkable rally in 2023, tripling in value. The stock has bounced back with the broader market this November, though it remains just shy of the 476.09 double-bottom buy point.
In conclusion, while Nvidia stock is not a definitive buy at this moment, its status as a market leader in high-growth areas makes it a key stock to monitor closely.