Nvidia shares are wavering around the 200-day moving average in early trades on Thursday. Is the stock a buy or sell now?
Late Wednesday, Meta Platforms and Microsoft announced $37.4 billion in capital spending during the December quarter. While Meta's Chief Executive Officer Mark Zuckerberg said it was too early to judge what DeepSeek's model implied for future spending on AI, Microsoft said that its spending on AI data centers would slow next year.
Earlier, Zuckerberg indicated data-center spending plans of $60 billion-$65 billion in 2025.
Meta stock is on IBD Leaderboard while Microsoft is an IBD Long Term Leader.
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Microsoft had announced in December that the company was not "chip supply constrained." In its Securities and Exchange Commission filing earlier this year, Nvidia disclosed that one customer accounted for 13% of its fiscal first-quarter revenue. UBS analyst Timothy Arcuri believed that customer was Microsoft.
On Monday, Nvidia suffered the biggest one-day market cap loss for any public company on record after The Wall Street Journal reported that Chinese artificial intelligence company DeepSeek's latest large-language model came close to the performance its American rivals at a fraction of the cost. DeepSeek AI models cost $5.6 million to train compared with $100 million-$1 billion that Anthropic Chief Executive Dario Amodei noted as the cost last year.
Nvidia is a top AI stock to watch despite Monday's plunge.
A company spokesperson noted that DeepSeek's AI model uses a Test Time Scaling method that relies on other widely available AI models and takes longer to come up with better answers. This method allowed the system to be in compliance with export restrictions, the Nvidia spokesperson said.
Citi analyst Christopher Danely said that the model depends on cloud service providers and is evidence of "continued strong growth in spending in AI."
Technology Partner For Stargate Project
Meanwhile, late Tuesday last week, President Donald Trump announced a joint venture called Stargate involving OpenAI, Oracle and SoftBank. Together, the companies will invest up to $500 billion in four years to build data centers and other infrastructure for AI applications. Nvidia will be a technology partner for the new company.
However, Tesla CEO Elon Musk cast some doubts on Twitter/X and stated that "they don't actually have the money."
On Wednesday, reports stated that SoftBank may invest up to $25 billion in OpenAI.
Nvidia stock rose amid news, also on Tuesday last week, that Trump had revoked an order by former President Joe Biden that required some AI developers to share their safety test results with the government before making them public.
On Thursday last week, South Korean chip firm SK Hynix indicated concerns over demand for its chips. SK Hynix supplies high bandwidth memory chips which, when packaged with Nvidia's advanced processors, make high speed computation needed for AI applications possible.
Nvidia Stock Fund Ownership
Funds own 40% of shares outstanding, according to IBD MarketSurge. But going by its Accumulation/Distribution Rating of D+, funds aren't necessarily buying shares. The rating measures price and volume action over the last 13 weeks.
Shares fell on Jan. 16 even after Nvidia's partner, chipmaker Taiwan Semiconductor, beat estimates for its fourth quarter and gave a strong outlook for AI-chip demand. Analysts said the chip foundry had guided AI revenue to double this year, as demand continued to exceed supply.
On Jan. 15, KeyBanc analyst John Vinh raised concerns over manufacturing yields, which are limiting shipments of its liquid-cooled rack systems containing Blackwell chips. The analyst cut the 2026 revenue target from Nvidia's data center business to $185 billion from $200 billion while maintaining an overweight rating and price target of 180.
On Jan. 14, a report said that Trump's transition team has the inflationary effect of tariffs in focus and is looking at a more gradual approach. The new proposal is eyeing a 2%-5% increase per month rather than a single hefty tariff, Barron's reported.
Nvidia Responds To Export Curbs
Shares fell after the Biden administration issued new regulations on chip exports Jan. 13. Apart from 18 countries, chip exports will be restricted to 50,000 per country.
Reports also stated that countries would require a license when orders exceed 1,700 advanced AI chips. The restrictions will impose control over how "America's leading semiconductors, computers, systems, and even software are designed and marketed globally," Ned Finkle, Nvidia's vice president of government affairs, said in a statement.
Similar to export curbs, a trade war fought with tariffs could hurt foreign sales of U.S. semiconductor companies to some countries.
Oracle executive Ken Glueck noted that the new rules could reduce the global chip market by 80% for U.S. chip companies, and that "a rule of this consequence on that timetable will turn the U.S. cloud industry upside down."
Elsewhere, HSBC analyst Lee Frank noted concerns over a "supply chain overhang" for Blackwell chips that could hurt Nvidia's ability to deliver another beat-and-raise quarter.
Nvidia's price performance has worsened. The relative strength line, which compares the stock with the S&P 500 index, has dropped. In terms of 12-month price performance, the stock has still beaten 88% of other stocks in Investor's Business Daily's database.
Strong First Quarter Expected
Analysts at UBS noted they expect results for the current quarter and the outlook for the fiscal first quarter to be strong. Yields for Blackwell have "inflected higher," while Nvidia's product mix is shifting away from Hopper to Blackwell.
Analysts also see revenue streams for the chip leader from original equipment manufacturers as they build inventory.
Meanwhile, Hon Hai expects to ship out the GB200 rack system that has Blackwell chips earlier than expected, UBS noted. Total revenue from Blackwell in January is seen hitting $9 billion in the January-ended quarter, up from $5 billion.
For the fourth quarter, total revenue estimates stand at $42 billion with $47 billion in the April quarter. UBS maintained a price target of 185 and a buy recommendation.
$113 Billion Revenue Target Looms After CES Sideshow
On Jan. 6, Huang said the "ChatGPT moment for general robotics" was near, but investors were eager for updates on Nvidia's Blackwell chip ramp up and early indications for its next chip, Rubin. Nvidia's data center business is expected to generate $113 billion in revenue for the year that ends in January, according to FactSet — more than the total revenue estimate for any other chip company. That makes its other ventures a sideshow.
Challenging December Spills Into January
December was a challenging month for Nvidia investors. But the stock has faced more headwinds in January.
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On Dec. 12, news that the Supreme Court had dismissed Nvidia's appeal in a securities fraud lawsuit from shareholders pressured the stock. The 2018 suit was triggered when Nvidia's revenue took a hit amid a crash in cryptocurrencies and sought to investigate how much of its sales depended on digital currency.
Shares also fell after Broadcom's results showed strong demand for its AI processors. Broadcom competes with Nvidia in data center AI networking gear. It indicated that two large customers were developing their own next-generation AI processors using Broadcom's chips. Broadcom is also designing an AI chip for Apple.
But Morgan Stanley analyst Joseph Moore noted that "based on conversations with customers," he anticipates the biggest users of application-specific integrated circuits, or ASICs, to shift back to graphic processing units, or GPUs.
Morgan Stanley Top 2025 Pick
Shares gained nearly 4% on Dec. 20 after Moore named Nvidia a "top 2025 pick." But he trimmed his price target on the stock to 166 from 168.
The analyst does not expect delays in the Blackwell chip production. Moore said that a slowdown in the older Hopper chip is expected. But he adds that will make more high-end memory chips available for its Blackwell line.
Nvidia's GPUs can be used for several AI tasks. But ASICs that its rivals are focusing on are meant to fulfill a single purpose. Mizuho analyst Jordan Klein noted that while "custom silicon will quickly gain share each year from GPUs, GPUs will be dominant for training purposes."
Trump Tariff Plans Move Nvidia Stock
Shares fell 2.6% on Dec. 9 amid news that China's State Administration for Market Regulation is investigating whether Nvidia has violated its antimonopoly laws. Earlier, shares came under pressure after President-elect Donald Trump said he plans big tariffs on goods from China, Mexico and Canada.
But Bernstein Research analyst Stacy Rasgon noted that "raw semiconductor" imports from these countries were tiny and would not hurt Nvidia. The analyst did say the tariff raises some concerns that there may be more broad-based action that could hurt the semiconductor industry and even leaders like Nvidia.
Mizuho analyst Jordan Klein noted that the "restrictions seem in line or less severe than anticipated." Piper Sandler analysts also stated there were fewer entities on the restriction list than expected.
In November, analysts at Piper Sandler projected a 20% upside for the stock and raised their price target to 175 from 140. Nvidia is positioned to gain most from the increase in the total AI accelerator market. Piper Sandler sees that at $70 billion in 2025.
Melius Research analysts also raised their price target to 185 from 165 and maintained their buy rating.
Stock Market Leader
For Nvidia, its earnings growth is its strong point.
The AI chip behemoth continues to be a stock market leader and has an ideal Earnings Per Share Rating of 99, while the stock also shows all-around strength with a Composite Rating of 99.
According to FactSet data, Nvidia ranks first among S&P 500 companies for revenue and earnings growth estimates through 2026.
Analysts expect a compound annual growth rate of 5.7% in sales for the S&P 500. They see 13.8% growth in earnings per share over two years. But they see Nvidia's two-year compound growth reaching 35.5% in sales and 35.1% in earnings per share.
Third-Quarter Results Beat Views
Third-quarter sales came in at $35.08 billion with earnings of 81 cents per share. Analysts polled by FactSet had estimates of 75 cents per share on sales of $33.17 billion. Sales also beat the AI chip leader's outlook of $32.5 billion for the quarter.
Sales nearly doubled from the prior year, when Nvidia reported $18.1 billion in revenue.
Nvidia Stock: A Must-Watch
Meanwhile, bullish trends for artificial intelligence make Nvidia a must-watch. In September, consulting firm Bain said the total addressable market for AI hardware and software will grow 40% to 55% annually for at least the next three years.
Demand for Nvidia's next generation graphics processing unit, the GB200, is expected to reach 3 million in 2026. That compares with 1.5 million for its H100 units in 2023.
New findings showed that Nvidia was the most bought stock by retail investors in 2024, as they poured nearly $30 billion into the AI stock in for the year as of Dec. 17, according to Vanda Research. That takes the crown from Tesla, which was most popular stock among retail investors during 2023. Nvidia is on track for more than twice Tesla's 86% gain so far this year.
It also replaced Intel in the Dow Jones Industrial Average in November, becoming the fourth Magnificent Seven stock to join the list of blue chips. The others are Apple, Amazon.com and Microsoft.
IPhone Moment Of AI
Nvidia's graphics processing units help accelerate computing in data centers and AI applications.
The company was a pioneer in graphics processors 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 chips paved the way for the "iPhone moment of AI."
That helped Nvidia turn the tide on its results. It had reported three quarters of declining year-over-year sales. It also showed four quarters of tapering earnings in late 2022 and early 2023.
But then the company achieved record top- and bottom-line growth in the six most recent quarters.
Is Nvidia Stock A Buy?
Looking at chart signals and technical measures can help investors assess whether Nvidia stock is a buy now.
Nvidia is well positioned to weather higher-for-longer interest rates in 2025 than some rivals, according to Kathleen Brooks, research director at brokerage firm XTB, thanks to its high profit margins.
The stock dived below its 50-day and 200-day moving averages on Monday but rebounded above the 200-day line on Tuesday. However, Meta's and Microsoft's spending outlooks are not helping the stock much. Nvidia stock also has to retake the 50-day line and build a base before it becomes a buy again.
