Nvidia (NVDA) stock approached the 50-day moving average on Wednesday. On Tuesday, shares rose to retake the 21-day exponential moving average amid news that China-based Huawei Technologies is testing an advanced artificial intelligence chip that is comparable to Nvidia’s H100.
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Nvidia Is Dominating The AI Game. Can It Continue?
Nvidia faces U.S. sanctions in exporting its advanced data center chip to China. According to the report, Huawei’s chip, the 910C, could face hurdles from further U.S. sanctions on machine components.
Shares of Nvidia have rebounded from a psychologically important level of 100. That can tempt investors back to buy the stock. Emotions can quickly come into play and upend decisions. But checking several technical measures and chart readings and time-tested trading rules improve the odds of success and help investors assess whether Nvidia stock is a buy now.
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, AI stock Nvidia had a huge 239% run. After losing ground in July and this month, it’s up just a little more than 100% so far this year.
But fundamentals make up just one of four 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.
As it heads into its second-quarter report later this month, Nvidia’s recent stock action holds a mix of the good and the bad. Meanwhile, recent market volatility makes risk management as important as timing stock picks.
On Monday last week, the stock lost 6.4% amid a report that the AI chip leader will delay its next-generation AI chip by at least three months due to a flaw in the design.
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.
IBD MarketSurge’s weekly chart shows that the stock lost 29% of its value over four weeks while the stock’s performance vs. the S&P 500 suffered.
In early August, shares 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.
fter losing its footing at the 50-day moving average more than two weeks ago, Nvidia is now 3% below that level.
Demand Rising For AI Chips
Good news came from Meta Platforms (META) as its AI spending plans gave the leader in AI chips a further boost. Meta is a big customer of Nvidia AI chips. According to reports from CNBC, Meta plans to have 350,000 Nvidia H100 graphic cards installed by year-end.
In June, Nvidia said it planned to roll out its most advanced artificial intelligence platform in 2026. The AI chip leader will also use next generation memory to improve process time.
Also in early June, Foxconn announced its plans to build an advanced computing center in Taiwan using Nvidia’s Blackwell chips. Nvidia has teamed up with Foxconn to build data centers to expand into autonomous driving and the electric vehicles market. While Tesla uses Nvidia’s chips, it plans to custom build them in-house in the future.
Nvidia Stock Split
Shares started trading on a split-adjusted basis on June 1o.
But the split could go beyond just lowering the price of each share. A lower price would make Nvidia a candidate for the Dow 30, which is a price-weighted index.
Previously, Apple (AAPL) and Amazon.com (AMZN) joined the Dow after stock splits.
The stock split will build further momentum for the AI chip leader and present what one analyst called a “generational buying opportunity.”
Nvidia Stock: First-Quarter Results Shine
Second-quarter results are due on Aug. 28.
Shares of Nvidia rose to record highs after fiscal first-quarter results beat estimates yet again on May 22. Sales grew 262% to $26 billion while earnings of $6.12 per share were 461% higher.
The AI leader has also teamed up with Microsoft to make the latest AI software available on Nvidia’s graphic processing units.
Earlier, 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 chips 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.
AI Products Drive Growth
Nvidia has earned a reputation for being a trailblazer. 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.
Overall worldwide AI chip revenue will grow 26% from $53.4 billion in 2023 to $67.1 billion in 2024, according to a recent report from research firm Gartner. That is expected to double to $119 billion by 2027.
Nvidia’s graphic processing units help accelerate computing in data centers and AI applications.
Top Ratings For Nvidia Stock
Nvidia stock still boasts a strong 98 Relative Strength Rating. The EPS Rating is an ideal 99 while the stock holds a Composite Rating of 98.
Nvidia also is one of the Magnificent Seven stocks that led the stock 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’s chart shows the stock is working on a base with a possible buy point at 136.15, according to IBD MarketSurge. Watch for earlier entries at the 50-day line or trendline entries after the stock clears that level.
It’s best now best to wait until the stock retakes the 50-day line and builds another base to make an initial purchase of the AI chip stock. Moreover, institutional support could use improvement as its relative strength line begins to recover. The stock is not a buy right now.
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