Nvidia (NVDA), a giant in data centers and gaming, is supercharging investor interest in artificial intelligence. Is Nvidia stock a buy, with earnings due later this month?
Semiconductor, AI News
Nvidia leads in artificial intelligence (AI) chips, but competition is rising. Key customer Microsoft (MSFT) may be working on its own AI chip. OpenAI, whose backers include Microsoft, reportedly is exploring its own AI chips as well.
On Oct. 31, a Wall Street Journal report said the latest U.S. curbs on AI chip sales to China could mean $5 billion in order cancellations for Nvidia.
Companies like Nvidia and Microsoft tap the emerging market for generative AI. Generative AI can create content, including written articles, from simple phrases by analyzing vast amounts of data. It can also write programming code.
The AI chip leader plans to report earnings for its fiscal third quarter on Nov. 21. For those looking for the top large-cap stocks to buy now, here’s a dive into NVDA.
Nvidia Stock Technical Analysis
Shares of Nvidia cleared a trendline entry in light volume, moving above the Nov. 7 high of 462.18.
Nvidia stock has rebounded in early November along with the rest of the stock market. NVDA offers a 476.09 buy point from a double-bottom base, the IBD MarketSmith chart shows. After a six-day rally, the chip stock is now just 2% below that traditional entry and back above the 50-day moving average.
After a painful 2022, NVDA stock has soared around 219% year to date. It mostly held up better than growth stocks at large during recent market sell-offs, while hitting a five-month low in October.
Nvidia joined IBD Leaderboard after gapping up on earnings in February. It surged from May to August, hitting an all-time high, on AI-fueled earnings and outlook.
The relative strength line has flattened out a bit. That means Nvidia is neither leading nor lagging the market. A rising RS line means that a stock is outperforming the S&P 500. It is the blue line in the chart shown.
NVDA earns a best-possible IBD Composite Rating of 99. In other words, Nvidia stock remains in the top 1% of all stocks in terms of technical and fundamental metrics.
Nvidia’s EPS Rating is 93 out of 99 and its SMR Rating is an A, on a scale of A to a worst E. The EPS rating compares a company’s earnings growth to other stocks. Its SMR Rating gauges sales growth, profit margins and return on equity.
On Aug. 23, the chip giant issued another big beat-and-raise report, driven by its data-center business.
Year over year, Nvidia earnings rocketed 429% in Q2, while sales soared 101%.
The Santa Clara, Calif.-based company’s data-center revenue surged 171%. The data-center business includes the A100 and H100 AI chips needed for AI applications.
For the current third quarter, Nvidia guided sales of $16 billion, up 170%.
For the full year, analysts now expect Nvidia earnings to rebound 222% as sales jump 104%. Last year, Nvidia earnings fell 25% per share.
Out of 51 analysts covering NVDA stock, 49 rate it a buy. Three have a hold and no one has a sell, according to FactSet.
NVDA Backstory, Rivals
The fabless chipmaker pioneered graphics processing units, or GPUs, to make video games more realistic. It’s expanding in AI chips, used in supercomputers, data centers and drug development.
Nvidia’s GPUs act as accelerators for central processing units, or CPUs, made by other companies. It’s working on “supercomputers” combining its own CPUs and GPUs.
In addition, Nvidia chips are used for Bitcoin mining and self-driving electric cars.
Nvidia has made a big push into metaverse applications.
Currently, the fabless group ranks No. 25 out of 197 industry groups. Fabless companies design the hardware while outsourcing the manufacturing to a third-party firm.
For the best returns, investors should focus on companies that are leading the market and their own industry group.
Is Nvidia Stock A Buy?
On a fundamental level, Nvidia is poised for explosive growth. Earnings should more than triple this fiscal year, driven by booming chip sales for data centers and artificial intelligence.
The fabless chipmaker is expanding in other growth areas, such as automated electric cars, cloud gaming and the metaverse as well.
But macroeconomic uncertainties linger. Geopolitical risks are also rife, from the U.S.-China trade war to actual war in Ukraine and Israel.
NVDA stock has staged a massive comeback, more than tripling in 2023 so far. It is now actionable from an early trendline entry, as it continues to work on a 476.09 traditional buy point.
Bottom line: Nvidia stock is a buy right now. As a chip company with exposure to top growth markets, NVDA is always one to watch.
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