One analyst calls Wednesday's fiscal second-quarter report from Nvidia the "most important tech earnings in years." It's not hard to see why. The artificial intelligence juggernaut has already posted four straight quarters of triple-digit earnings and sales growth. Now Wall Street expects a fifth when the IBD Leaderboard member reports this week as Nvidia stock targets a breakout to an all-time high.
How Nvidia reports — and how the market reacts — is sure to impact fellow Magnificent Seven members. Meta Platforms and Apple are both near buy points of their own, while Tesla, Alphabet, Microsoft and Amazon.com remain mired below their 10-week moving averages.
Test 1: All Eyes On Nvidia Earnings
According to IBD Stock Checkup, Nvidia has generated — on average — 500% earnings growth over the last three quarters. During the same period, sales growth has ranged from 206% to 265%.
On May 22, the company posted fiscal Q1 revenue growth of 262% to $26 billion. Earnings rose 455% to 61 cents per share.
When Nvidia reports on Wednesday after the close, analysts expect the AI leader to generate a 113% jump in sales to $28.7 billion. On the earnings front, Wall Street forecasts 139% earnings growth to 65 cents a share. For the full fiscal year, analysts see a 109% rise to $2.72 per share.
AI data center products and services now make up the lion's share of Nvidia's current total sales. CEO Jensen Huang has noted that both accelerated computing and generative AI have both reached a "tipping point." AI-related revenue in industry verticals such as finance and health care have grown to multibillion-dollar levels.
Risk Management — One Of 4 Pillars Of The IBD Methodology
Test 2: Can Nvidia Stock Keep Riding 1,202% Gain?
The eye-popping growth noted above has long put Nvidia in the spotlight. And that growth has helped Nvidia stock soar a whopping 1,202% from the low hit in October 2022 to the record high notched in June.
While investors should note that it's risky to buy any stock just before earnings, Nvidia continues to work on a cup pattern with a 140.76 buy point. The stock is also targeting an earlier trendline entry.
Earlier this month, Nvidia stock showed it can take a punch and keep on ticking higher. Shaking off a spat of selling in July that dragged it below the 10-week line, Nvidia has since climbed back above that benchmark. On Tuesday, the stock rose over 1%, holding support above its 50-day line.
Its relative strength line, which faltered in July, has turned higher but remains shy of a 52-week high.
Investors should also note that Nvidia's current setup is a fourth-stage base. Such late-stage patterns entail more risk, particularly after such a long and impressive climb.
Test 3: Managing Expectations And Risk
Nvidia has long been and remains one of the top AI stocks to watch. And it could certainly surprise and delight Wall Street when it reports on Wednesday.
But wisely investing in stocks requires a knowledge of how to manage risk as well as having the discipline to apply sound rules on how to buy stocks and when to sell stocks.
As Nvidia stock has navigated a remarkable climb in recent years — as well as a volatile period last month and its resurgence back above its 10-week line — it has revealed the eight "secrets" of when to sell stocks.
Nvidia has formed multiple bases since a first-stage cup in December 2022-January 2023, offering multiple buying opportunities. Now, as it gets set to release its highly anticipated earnings report this week, investors should have a game plan in place ahead of time.
For investors who already have a position in Nvidia stock, will you buy more shares if the stock breaks out? And how many?
For investors looking to start a new position, keep in mind that Nvidia has already made a massive move. A breakout would be from a late-stage base.
So as all eyes turn to Nvidia, investors should also turn their attention to how to manage their own risk and potential opportunities.
