When a stock pulls back, it is best not to panic. Check its recent action and chart patterns to see if it is anything to worry about.
Nvidia fell 2% on Friday and was unchanged on Monday after reports from Barron's that China was trying to boost local AI chip makers and urging local companies to avoid Nvidia chipes. China accounted for 11% of Nvidia sales in the first half the fiscal year ending in January.
Nvidia stock cleared multiple trendline entries last week. The stock is 5% above its 50-day moving average. Shares are 14% below their split-adjusted all-time high of 140.76 after rising more than 4.6% last week. But should you be buying Nvidia stock now?
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.
On Tuesday, AI server provider Super Micro Computer started trading on a split-adjusted basis. The company announced the 10-for-1 stock split in its fourth-quarter earnings report in August. Stock splits increase the number of shares outstanding but do not change the market capitalization of the stock.
AI's Total Addressable Market
On Wednesday, 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 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 will collaborate with Nvidia to improve autonomous driving technology for Chinese EV manufacturers, several of which are rivals to Tesla. 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, Amazon.com and Microsoft 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 cited robust AI demand, which gave Nvidia stock a lift.
Oracle 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."
Earlier, results from Broadcom weighed on Nvidia stock. Broadcom's sales and earnings beat estimates but its sales outlook disappointed. Broadcom's outlook has implications for demand for AI chips.
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 over 140% 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: Microsoft Partnership
The AI leader has also teamed up with Microsoft to make the latest AI software available on Nvidia's graphic processing units.
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 59.
Its EPS Rating is an ideal 99, while the stock holds a Composite Rating of 99. The stock is also on IBD Leaderboard, IBD SwingTrader 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 is above its 50-day moving average and has cleared multiple trendline entries as market conditions improve. But investors may still want to wait till volume picks up. It's been running below average for a few weeks. Nvidia also offers a proper buy point of 140.76, which is its all-time high.
