Nvidia Stock Forecast: NVDA pulls back ahead of earnings as tech ...
Nvidia (NVDA) stock has shed another 3.5% to encircle $670 on Wednesday as the entire market braces itself for the most anticipated earnings release of the season. The premier semiconductor designer in the world releases its fourth-quarter results after the close on Wednesday.
Nvidia briefly became the third most valuable publicly-traded company last week, surpassing the market caps of both Amazon (AMZN) and Google-parent Alphabet (GOOGL). This week the company has shed more than 5%, dropping back into fifth place, as its lofty valuation worries many market participants, who conceive that an earnings miss or guidance cut would have repercussions for the whole market.
Additionally, Minutes from the previous Federal Reserve (Fed) meeting in January will be released during Wednesday’s session and are weighing on markets that don’t expect an interest rate cut in the near term.
Wednesday has tech stock reeling as Palo Alto Networks (PANW), Zscaler (ZS), SolarEdge Technologies (SEDG), Teladoc (TDOC) and Crowdstrike (CRWD) all sell off to the tune of double digits on earnings-related turmoil. The tech-heavy NASDAQ Composite is down about half a percentege point at the time of writing.
Wall Street is expecting Nvidia to post Q4 adjusted earnings per share (EPS) of $4.64. This would amount to an astounding 426% from a year ago and is the reason why Nvidia stock has gained 230% in just the last year.
Revenue is projected to rise 240% YoY to just shy of $20.6 billion as enthusiasm for artificial intelligence (AI) related server chips grows exponentially. Nvidia is the company at the heart of the supposed “AI revolution,” and competitors like Advanced Micro Devices (AMD) and Intel (INTC) are simply picking up the scraps.
For the quarter at hand, Nvidia has received more than 30 upward revisions to both earnings and revenue and not one lower revision. Goldman Sachs surprised the market earlier this month, when it upgraded its NVDA stock price target from $620 to $800 per share as the investment bank’s analyst said demand for AI chips would not let up in 2024.
Nvidia’s stock price will likely gyrate based on CEO Jensen Huang’s guidance for the 2024 calendar year (fiscal 2025). The current consensus calls for $21.51 in adjusted EPS on revenue of $91.3 billion for the full year.
Nvidia is the leading fabless designer of graphics processing units or GPUs. These sophisticated devices allow computers to better process graphics for display interfaces by accelerating computer memory and RAM. This is especially true in the world of video games, where Nvidia graphics cards became a mainstay of the industry. Additionally, Nvidia is well-known as the creator of its CUDA API that allows developers to create software for a number of industries using its parallel computing platform. Nvidia chips are leading products in the data center, supercomputing and artificial intelligence industries. The company is also viewed as one of the inventors of the system-on-a-chip design.
What is the history of Nvidia?Current CEO Jensen Huang founded Nvidia with Chris Malachowsky and Curtis Priem in 1993. All three founders were semiconductor engineers, who had previously worked at AMD, Sun Microsystems, IBM and Hewlett-Packard. The team set out to build more proficient GPUs than currently existed in the market and largely succeeded by late 1990s. The company was founded with $40,000 but secured $20 million in funding from Sequoia Capital venture fund early on. Nvidia went public in 1999 under the ticker NVDA. Nvidia became a leading designer of chips to the data center, PC, automotive and mobile markets through its close relationship with Taiwan Semiconductor.
What is Nvidia’s relationship to artificial intelligence?In 2022, Nvidia released its ninth-generation data center GPU called the H100. This GPU is specifically designed with the needs of artificial intelligence applications in mind. For instance, OpenAI’s ChatGPT and GPT-4 large language models (LLMs) rely on the H100’s high efficiency in parallel processing to execute a high number of commands quickly. The chip is said to speed up networks by six times Nvidia’s previous A100 chip and is based on the new Hopper architecture. The H100 chip contains 80 billion transistors. Nvidia’s market cap reached $1 trillion in May 2023 largely on the promise of its H100 chip becoming the “picks and shovels” of the coming AI revolution.
Why does Jensen Huang have a cult following?Long-time CEO Jense Huang has a cult following in Silicon Valley and on Wall Street due to his strict loyalty and determination to build Nvidia into one of the world’s leading companies. Nvidia neary fell apart on several occasions, but each time Huang bet everything on a new technology that turned out to be the ticket to the company’s success. Huang is seen as a visionary in Silicon Valley, and his company is at the forefront of most major breakthroughs in computer processing. Huang is known for his enthusiastic keynote addresses at annual Nvidia GTC conferences, as well as his love of black leather jackets and Denny’s, the fast food chain where the company was founded.
The worry among traders in the lead up to earnings is that Nvidia stock is showing signs of a bearish Evening Doji Star pattern on the weekly chart. This is when a Doji candlestick is perched above the previous candle’s long rising candle and followed by a bearish candlestick that closes below the midpoint of the first candlestick in the pattern.
Adding to the worries, the Doji candlestick from last week sits right on top of the long-term top trendline that has been creating a ceiling on NVDA stock since August 2020.
If Nvidia stock does miss on the earnings result, then expect NVDA to crater back toward the former resistance level of $500. The 21-week Simple Moving Average is also not far above that price level.
NVDA weekly stock chart
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