Growth stock trader Joe Fahmy has faith in Nvidia, with the leading chipmaker riding high in 2023 on an AI-fueled investor wave.
"It's still my largest position, and I have strong conviction into this one," Fahmy, Zor Capital managing director, told Investor's Business Daily's "IBD Live" show on Friday.
Nvidia is on IBD's list of market leaders near a buy point, as investors digest the chipmaker's August earnings report and outlook. The chipmaker has seen a surge of interest from investors as AI companies find graphics processors particularly well-suited for the multitasking demands of artificial intelligence systems like ChatGPT.
Nvidia has a perfect IBD Composite Rating of 99, according to the IBD Stock Checkup, and is ranked first among its fabless semiconductor peers.
The chip sector is under some pressure in the stock market today, with NVDA stock down 2% and at risk of closing below its 50-day moving average. Still, Nvidia is up more than 200% so far this year. A bounce off its 50-day line could be an area where some traders might consider accumulating some shares.
Nvidia's Guidance Analyzed
Investor fears that Nvidia may not hit its metrics every quarter are overblown, Fahmy says. He believes the company's guidance is likely conservative.
Fahmy says Nvidia CEO Jensen Huang has good visibility into demand for the company's chips and systems. Nvidia's backlog can support its earnings and revenue outlook for at least the next few quarters.
Investor faith in Nvidia stock was shaken after Cathie Wood's Ark Genomic Revolution ETF unloaded shares of NVDA last Thursday. However, the ETF continues to hold 124,000 Nvidia shares as of late last week.
Despite potential headwinds, Fahmy says investing in the chipmaker remains an easy call. "I have friends who literally put a thousand dollars into (Nvidia) options and made over $40,000 — and these are friends who can't even tie their own shoes," said Fahmy, regarding stock speculators placing trades ahead of Nvidia's quarterly report in May.
However, the options market makers got smarter ahead of the most recent earnings report. Fahmy says that's why the stock didn't explode higher despite another blowout quarter.
The stock's current action is part of the market's function in shaking people out, he says. "Get those strong entry points — that can help you sit through some normal pullbacks to the 21-day and the 50-day along the way," he said.
Nvidia remains Fahmy's top pick. "Why take Michael Jordan out of the game to put in a lesser player?" he said. "I'm sticking with the leader."
