After a nasty fall last week, Nvidia (NVDA) is making a significant rebound this week, adding over 4.2% after a 4.1% loss in the prior week. But is Nvidia stock a buy now?
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Emotions can quickly come into play and mess up decisions. But time-tested trading rules improve the odds of success and help investors assess whether Nvidia stock is a buy now.
On Wednesday, shares surged 12.8% after analysts at Morgan Stanley named the AI chip leader a top pick again, maintaining an overweight rating and a price target of 144. CNBC quoted analysts who believe the recent sell off is overdone.
Then more good news came from Meta Platforms (META) late Wednesday 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.
After losing its footing at the 50-day moving average nearly two weeks ago, Nvidia is trying to regain that key level Thursday.
Demand Rising For AI Chips
On Tuesday last week, Nvidia announced a new AI Foundry service that will support Meta’s Llama 3.1, which will allow developers to build large language models using an open source model.
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.”
First-Quarter Results Shine
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.
Ahead of the earnings report, analysts at Baird, Susquehanna and Barclays increased their price targets on Nvidia.
Nvidia stock holds an Accumulation/Distribution Rating of E on an A+ to E scale. That reflects the heavy institutional selling in July.
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
Nvidia stock still boasts a strong 98 Relative Strength Rating. The EPS Rating and Composite Rating are an ideal 99.
Nvidia also is one of the Magnificent Seven stocks that led the 2023 stock rally. Some of these tech titans are customers that rely on Nvidia’s advanced chips. Nvidia is also one of the stocks that are forecast to 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 has cleared a 92.22 buy point. The stock is already extended, according to IBD MarketSurge.
In 2023, AI stock Nvidia had a huge 239% run and it’s up more than 100% so far this year.
Nvidia had climbed above profit-taking targets at 20% and 25% from 92.20 and an alternative buy point at 97.40. The stock is trying to retake its 50-day moving average, a possible resistance level.
Meanwhile, it’s best now to wait for another base or follow-on buy point to make an initial position in the AI chip stock. Moreover, institutional support could use improvement. The stock is not a buy right now, but could be very soon.
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