Nvidia is met resistance at a key level Friday as its hold looks precarious for now. Shares fell 6.4% on Thursday after earnings even though the AI chip leader beat analyst estimates. But should you be buying the stock now?
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How Nvidia Is Injecting AI Into The Health Care Industry
Timing your stock purchases can surely improve gains. But even with an obvious market leader like Nvidia (NVDA), it’s not easy to tell whether you should buy or sell the stock now. But chart signals and checking several technical measures can help investors assess whether Nvidia stock is a buy now.
Nvidia’s Second-Quarter Results
On Wednesday, 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.
The stock rebounded above the 50-day moving average Friday morning, but it was back below the line in midday trading. Recent market volatility makes risk management as important as timing stock picks. While a rally confirmation Aug. 13 lessened risk for stock investors, the tech-dominated Nasdaq fell below the 50-day moving average on Thursday and added a distribution day.
After a 4% gain last week, Nvidia stock is testing the 50-day moving average in a cup base and its split-adjusted all-time high of 140.76 is the next buy point.
On Monday, the stock briefly cleared a trend line entry near 130.75. Trendline entries can allow investors to buy earlier. But they are also more aggressive entries, especially ahead of earnings.
The stock remains below that level after earnings.
Nvidia’s Earnings-Fueled Run
Earnings have moved the 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 remains less than 1% higher for the month as August comes to a close. It is up a little more than 130% 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.
Reports from 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. Moreover, the outlook on the demand side remains strong as “all the major hyperscalers” increase their capex plans to help increase their cloud computing and data processing prowess.
Shares also fell after reports that the Department of Justice is investigating its acquisition of Run.ai, an artificial-intelligence startup. The company’s practices in selling multiple AI chips to cloud providers are also under scrutiny.
Good news came from Meta Platforms (META), however, as its AI spending plans gave Nvidia a further boost. Meta is a big customer of Nvidia’s AI chips. According to reports from CNBC, Meta plans to have 350,000 Nvidia H100 graphic cards installed by year-end.
Nvidia Stock: Microsoft Partnership
The AI leader has also teamed up with Microsoft to make the latest AI software available on Nvidia’s graphic processing units.
In May, Nvidia shares rose past a handle buy point after the Google AI Conference showed different ways in which artificial intelligence will improve search. The search giant also previewed an Android feature that will alert users to scams during a phone call. While Google’s tensor processing units are rivals to Nvidia’s chips, Nvidia dominates the data center AI chips market.
Nvidia stock holds an Accumulation/Distribution Rating of E on an A+ to E scale. That reflects the heavy institutional selling in recent weeks.
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 Nvidia Chief Executive Jensen 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 two most recent quarters.
Top Ratings For Nvidia Stock
Nvidia stock still boasts a strong 97 Relative Strength Rating. The EPS Rating is an ideal 99, while the stock holds a Composite Rating of 96.
Nvidia also is one of the Magnificent Seven stocks that led the stock in 2023 and much of this year. Some of these tech titans are customers that rely on Nvidia’s advanced chips. Nvidia is also one of the stocks that many analysts believe will outperform the market in 2024.
Is Nvidia Stock A Buy?
Chart patterns are a good way of telling when to buy or sell a stock.
Nvidia is testing its 50-day moving average. A strong rebound from that level or a breakout from a buy point will make the stock a buy. It is also important to see whether the new market uptrend holds up.
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