Nvidia (NVDA) has had a stellar week so far. The stock has rallied amid bullish views from its Chief Executive Officer Jensen Huang and analysts. As of Thursday's close, the stock had gained 16% and erased last week's 14% loss. Shares are nearly unchanged on Friday. But should you be buying Nvidia stock now?
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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 several technical measures can help investors assess whether Nvidia stock is a buy now.
Last week, Nvidia fell sharply below the 50-day moving average. The stock has recovered since and rebounded from the 50-day line, according to IBD MarketSurge chart analysis.
On Wednesday, Chief Executive Officer Jensen Huang said 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."
Earnings From AI Giants
On Monday, results from Oracle (ORCL) 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." Also, analysts at Morgan Stanley maintained an overweight and "top pick" rating on Nvidia with a price target of 150 on Monday, stating that concerns over declining gross margins were "overblown."
Results fromBroadcom (AVGO) weighed on the stock Friday last week. Broadcom's sales and earnings beat estimates but its sales outlook disappointed. Broadcom's outlook has implications for demand for AI chips.
On Wednesday last week, shares fell 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.
The stock plunged sharply below the 50-day line and saw its largest one-day market cap loss for any U.S. company on Tuesday last week, according to Dow Jones Markets Data. Nvidia's market cap is now below $3 trillion.
Shares fell 6.4% after earnings on Aug. 28 even though Nvidia beat analyst estimates.
Nvidia's Second-Quarter Results
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 after earnings were announced, but it was back below the line at the close of the trading day. Ongoing market volatility makes risk management as important as timing stock picks.
Nvidia's split-adjusted all-time high of 140.76 is possibly the next buy point.
Ahead of earnings, the stock briefly cleared a trendline 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.
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 gained 2% in August. It is nearly flat this month and up 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 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.
Nvidia Stock: Microsoft Partnership
The AI leader has also teamed up with Microsoft (MSFT) 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 chip 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.
CEO Jensen 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 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 Relative Strength Rating of 97 from Investor's Business Daily. But its three-month RS Rating is 53.
Its EPS Rating is an ideal 99, while the stock holds a Composite Rating of 97. The stock is also on IBD Leaderboard and the growth IBD 50.
Nvidia is one of the Magnificent Seven stocks that led the market 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 has rebounded from the 50-day moving average.A continued rebound from the level can be an aggressive entry, although the market conditions have just started improving. The stock also offers a proper buy point of 140.76 which is its all-time high.
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