Nvidia (NVDA) is a giant in data centers and gaming, with AI chips a growth opportunity. A big profit increase at the end of May added to already massive gains in 2023. Is Nvidia stock a buy as it maintains its high position?
Semiconductor, AI News
On May 24, graphics chip maker Nvidia crushed Wall Street’s fiscal first quarter targets for record data center sales.
Chief Executive Jensen Huang said his company is ramping up production to meet the huge demand for artificial intelligence (AI) technology.
Customers use NVDA chips for AI applications, including generative AI. In the tech industry’s fierce battle for AI dominance, the advanced chips required for generative AI, such as the ChatGPT chatbot, are crucial.
For those looking for the best large-cap stocks to buy right now, here’s a dive into NVDA stocks.
Nvidia Stock Technical Analysis
Chip stock rose more than 24% on May 25 earnings and extended May 26 earnings.
The shares reached an intraday high of 394.80 on May 25, surpassing their previous all-time high of 346.47 reached in November 2021.
On May 1, Nvidia stock had hit a buy point of 281.20 after a tight three-week pattern. The most recent entry was support on the 10-week line last week, about 277.
Stocks are now much more comprehensive. In fact, NVDA shares are almost 100% above the 200-day moving average. So investors might want to consider taking profits now, but perhaps not selling unless other red flags appear. Many leaders peak once they get 70%-100% above their 200-day limits.
So far, Nvidia shares are now up more than 165% after crashing in 2022.
NVDA earns an IBD Composite Rating of 98 out of 99. In other words, Nvidia stock outperformed 99% of all other stocks in the IBD database in terms of combined technical and fundamental metrics.
Investors should generally focus on stocks with Comp Ratings of 90 or even 95 and above. Nvidia stocks often earn a spot on the IBD 50, Big Cap 20, and Sector Leaders lists.
The relative strength line reached an all-time high with the stock on May 26, the IBD MarketSmith charts show. A rising RS line means a stock is outperforming the S&P 500. It is the blue line in the chart shown.
The IBD Stock Checkup tool shows that NVDA has a Relative Strength Score of 99. That means it has outperformed 99% of all the stocks in IBD’s database over the past year.
The iShares PHLX Semiconductor ETF (SOXX) has both Nvidia shares and AMD shares.
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from Nvidia EPS rating is 68 out of 99 and are SMR assessment is a B, on a scale from A to worst E. The EPS rating compares a company’s earnings growth to that of other stocks. The SMR rating measures sales growth, profit margins and return on equity.
On May 24, the chip giant delivered a massive AI-powered beat-and-raise report. The Nvidia earnings report, including a super bullish sales forecast, drew superlatives on Wall Street.
The Santa Clara, California-based company earned $1.09 per share on revenue of $7.19 billion in the quarter ended April 30. Year-over-year, Nvidia’s revenues were down 20%, while revenues were down 13%.
In the first quarter, Nvidia data center sales increased 14% to $4.28 billion. Gaming chip sales fell 38% to $2.24 billion.
Analysts expect triple-digit earnings gains for the coming quarters, including the current quarter, which ends in July. They see Nvidia’s revenues grow more than 116% in fiscal 2024, on a 48% increase in revenue. Last year, Nvidia’s earnings fell 25% per share.
Of the 47 analysts who track NVDA stock, 38 rate it a buy. Eight have a hold and one has a sell, according to FactSet.
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NVDA Backstory, Rivals
The fabless chipmaker pioneered graphics processing units, or GPUs, to make video games more realistic. It expands into AI chips, used in supercomputers, data centers and drug development.
Nvidia’s GPUs act as accelerators for other companies’ central processing units or CPUs.
In addition, Nvidia chips are used for Bitcoin mining and self-driving electric cars.
Nvidia has one big push in metaverse applications.
Fabless chip stocks include Qualcomm (QCOM), Broadcom (AVGO) and Monolithic energy systems (MPWR).
Currently, the fabless group is ranked number 18 out of 197 industry groups. Fabless companies design the hardware while outsourcing production to a third party.
For the best returns, investors should focus on companies that are leading in the market and have their own sector group.
Is Nvidia Stock a Buy?
On a fundamental level, Nvidia’s revenues are expected to grow again. They should more than double this fiscal year, driven by booming chip sales for data centers and artificial intelligence.
The fabless chipmaker is also expanding into other growth areas, such as automated electric cars and cloud gaming. The adoption of the metaverse and cryptocurrencies could further drive demand for Nvidia chips.
However, macroeconomic uncertainties and the risk of a global recession remain.
NVDA shares have made a strong comeback in 2023, rising 165%. But stocks are way out of the right buy range, and they could pull back. Nvidia’s latest earnings report renewed investor confidence in its AI leadership.
Bottom line: Nvidia shares are not bargains. After another profit spike, NVDA looks lofty and existing investors could take some profit off the table. As a leading chip company with exposure to the top end markets, Nvidia is always one to watch.
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