Nvidia (NVDA), a data center and gaming giant, continues to simmer. The chip giant is considered one of the biggest winners of the AI boom. Is Nvidia Stock a Buy Right Now?
Semiconductors, AI News
On May 30, Nvidia CEO Jensen Huang announced a new supercomputer, software and services for generative AI (artificial intelligence). Generative AI can create content, including written articles, from simple descriptive phrases by analyzing and processing large amounts of data. It can also write computer program code.
Graphics chipmaker Nvidia beat Wall Street targets with record data center sales last quarter. Production is being ramped up to meet the huge demand for AI technology, CEO Huang said.
Nvidia is the leader in AI chips. In the tech industry's intense battle for AI supremacy, the advanced chips needed for generative AI, like the ChatGPT chatbot, are critical.
For those looking for top large cap stocks to buy now, here's a look at NVDA stock.
Technical analysis of Nvidia stock
Chip stock broke a buy point of 419.38 in June from a three-week tight pattern, with an early entry around 400. This offered existing investors an opportunity to add a few more stocks. Technically, NVDA is still in range with the buy zone at 440.35.
On June 20, shares hit a 52-week high of 439.90.
Nvidia stock rocketed in May on stunning gains and strong guidance. NVDA entered the IBD leaderboard in February after a profit gap.
Year to date, Nvidia stock is up 195% after crashing in 2022.
A key risk is that stocks of large tech companies have risen so much and so quickly that a decline is likely. So far, Nvidia is holding up well.
NVDA receives an IBD Composite Rating of 99, the highest possible score. In other words, Nvidia stock ranks in the top 1% of all stocks on both technical and fundamental metrics.
Investors should generally focus on stocks with a comp rating of 90 or even 95 and higher. Nvidia stocks often earn a spot on the IBD 50, Big Cap 20, and Sector Leaders lists.
The relative strength line is making new highs, IBD MarketSmith charts show. A rising RS line means a stock is outperforming the S&P 500. This is the blue line in the chart shown.
The IBD Stock Checkup tool shows that NVDA has a Relative Strength Rating of 99. That means it's outperformed 99% of all other stocks over the past year.
The iShares PHLX Semiconductor ETF (SOXX) holds both Nvidia stock and AMD stock.
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Nvidia's EPS rating is 67 out of 99 and it is SMR rating is a B on a scale from A to the worst E. The EPS rating compares a company's earnings growth to other stocks. Its SMR rating measures revenue growth, profit margins and return on equity.
On May 24th, the chip giant delivered a big beat-and-raise report. The Nvidia earnings report contained an optimistic, AI-backed sales forecast.
The Santa Clara, Calif.-based company posted earnings per share of $1.09 on sales of $7.19 billion for the quarter ended April 30. Year over year, Nvidia's earnings fell 20% while revenue fell 13%. But the results far exceeded Wall Street's expectations.
In the first quarter, data center revenue increased 14% to $4.28 billion. Gaming chip sales fell 38% to $2.24 billion.
Analysts expect Nvidia's earnings to rebound 109% in fiscal 2024 on revenue up 55%. Over the past year, Nvidia's profits have fallen 25%.
Out of 50 analysts covering NVDA stock, 42 rate it as a Buy. According to FactSet, seven have a hold position and one has a sell position.
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NVDA Backstory, Rivals
The fabless chipmaker developed graphics processing units (GPUs) to make video games more realistic. It's expanding into AI chips used in supercomputers, data centers and drug development.
Nvidia's GPUs act as accelerators for central processing units or CPUs from other companies. It works on “supercomputers” that combine their own CPUs and GPUs.
In addition, Nvidia chips are used for Bitcoin mining and self-driving electric cars.
Nvidia made one major push into metaverse applications.
include fabless chip stocks Qualcomm (QCOM), Broadcom (AVGO) and Monolithic Energy Systems (MPWR).
The fabless group is currently ranked 5th out of 197 industry groups. Fabless companies design the hardware and outsource the manufacturing to a third party.
This is what investors should focus on for the best returns market leading companies and their own industry group.
Is Nvidia Stock a Buy?
At a fundamental level, Nvidia earnings are expected to start growing again. They are expected to more than double this fiscal year, driven by booming data center and artificial intelligence chip sales.
The fabless chipmaker is also expanding into other growth areas like automated electric cars and cloud gaming. The launch of the Metaverse and cryptocurrencies could further boost demand for Nvidia chips.
However, macroeconomic uncertainties and the risk of a global recession remain.
NVDA stock has made a massive comeback, nearly tripling so far in 2023. Shares rallied a three week tight entry of 419.38 in June and are in a proper buy zone, although look set for a decline.
Nvidia's latest supercomputer news and results have reaffirmed its leadership in AI.
Bottom line: Nvidia stock is technically a buy for existing investors, but with some caveats. As a leading chip company with access to top-end markets, Nvidia is always a company to watch.
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