Nvidia (NVDA) remains flat after three sessions of selling. Shares of the artificial intelligence leader have climbed since its last earnings report, but the stock has shown signs of plateauing. Is Nvidia stock a buy now?
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The leading AI stock fell about 2% in light volume Tuesday, but found support at the 21-day exponential moving average. The stock has been trading at a tight pace for several days, calming down after its June 20-24 plunge.
Shadow looms over Nvidia stock after strategist Ed Yardeni Warned that AI stocks are entering a bubble.
“While we appreciate the productivity-enhancing potential of artificial intelligence, the AI phenomenon has many of the characteristics of a bursting bubble,” Yardeni said in a note to clients. He believes AI leaders, including Nvidia CEO Jensen Huang, are over-promoting the technology, which is helping to drive AI stocks to new highs.
In separate news, Ken Laudan, portfolio manager at Buffalo Funds, expressed skepticism about the speed of AI infrastructure development and is reducing AI holdings in his Buffalo Large Cap Fund.
“I am increasingly concerned that the transition from AI enablers to adopters will take much longer than I had anticipated,” he said. told MarketWatch. Laudan describes AI enablers as companies that provide the hardware and AI adopters as software companies that sell broad-language AI models in addition to enterprise software to customers.
Reuters reported on Monday French regulators are considering charging Nvidia with antitrust practices. The issue centers on Nvidia’s chip programming CUDA Softwarewho is the only one 100% compatible for its graphics processing units.
Nvidia shares were hit hard on Thursday after Micron (IN) fell due to disappointing revenue forecasts for the current quarter. Micron is one of the few companies that makes a specialized memory chip used in AI accelerators that speed up machine learning and AI applications. And Nvidia uses those chips in its AI subsystems.
Despite Nvidia’s recent weakness, analysts aren’t giving up on the AI stock just yet. On Wednesday, Citigroup raised its price target from $126 to $150 and maintained its buy rating, citing Nvidia’s next-generation AI chip plans. Also on Wednesday, Cantor Fitzgerald raised its price target from $140 to $175 and maintained its overweight rating.
Nvidia is arguably the industry leader in AI investment. Having established itself as a leading chip designer for high-performance computer graphics, the company’s technology has become a go-to source of chips for the massive computing needs of artificial intelligence applications.
Its AI technology is used by industries ranging from graphics to automotive, manufacturing and healthcare.
But Nvidia is coming off its worst three-day selloff since December 2022. The company lost $430 billion in market capitalization during the three-day selloff, the largest amount in its history, and closed Monday with a market cap below $3 billion, according to Dow Jones Market Data. Tuesday’s powerful move pushed the stock back above the $3 trillion market cap level.
Nvidia withdraws from support line
THE MII 50 And Large cap 20 The stock lost about 16% during the three-day selloff. Nvidia stock found support at its 21-day exponential moving average Tuesday. The stock is currently above its 50-day moving average.
It remains the No. 1 stock of 39 in IBD’s fabless semiconductor industry group, which has risen to the top spot of 197 IBD groups. It still holds 99 Composite MII And Earnings per share valuation.
Nvidia has broken away from a Second step cup base with handle with a 92.22 buy points May 15. On May 23, the stock hit new highs after the company crushed first fiscal quarter estimates. AI’s stock soared and reached a high of $100 million in late May. 20% gain on lower entry. That justified at least some of the profits, but Nvidia continued to charge higher prices.
One of the first signs that Nvidia was in the lead came from June 6 to June 18. Volume Inventories began to dry up during this period as they reached new highs. This is a sign that buying was beginning to dry up.
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Nvidia stock hit an all-time high on the morning of June 20, before profit-takers took over and the stock reversed sharply lower. The stock closed down 3.5%, then lost another 3.2% the next day. The selloff occurred in above-average volume.
Nonetheless, Nvidia stock has significant cushion around the 92.22 and 97.40 buy points.
Earnings estimates are strong but down
The AI company has posted triple-digit growth in both earnings and sales over the past four quarters. Nvidia has outpaced First fiscal quarter profit and sales estimates on May 22. Its quarterly adjusted earnings per share rose 461% from the year-ago period. Revenue rose 262% to $26 billion. It reported a record Quarterly data center revenue of $22.6 billion, an increase of 427% year-on-year.
“AI will bring significant productivity gains to nearly every industry and help businesses become more cost and energy efficient, while increasing revenue opportunities,” Nvidia founder and CEO Jensen Huang said in the earnings release.
Nvidia has split its stock 10-for-1, effective June 7. The shares had surpassed the psychological level of 1,000 before the split.
Nvidia’s earnings growth won’t be able to keep up with this breakneck pace indefinitely. Consensus estimates call for growth in the current quarter to hit 136%, then fall to 74% and 49% in the following two quarters, according to Booming market.
Earnings for the fiscal year ended January were up 294%. FactSet estimates fiscal 2025 EPS will be $2.71, up 108% from the prior year. For the next fiscal year, estimates show earnings growth slowing to 34%, or $3.62 per share.
Is Nvidia Stock a Buy?
The stock is more or less flat as it attempts to recover from its three-day slide. Shares remain extended from their latest buy points and are not in a buy configuration, according to MICI Booming market.
In 2023, AI stock has seen a whopping 239% rise and is up about 146% year-to-date, even after the recent drop.
It is best to wait for the selling to taper off and another base to form or a buy point to present itself to buy the AI chip stock. Therefore, it is not a buy at this time.
Follow Kimberley Koenig for more stock market news on X/Twitter @IBD_KKoenig.
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