Nvidia (NVDA) stock struggled to make gains on Monday to start a big week of earnings for the Magnificent Seven. Microsoft (MSFT) reports on Tuesday with Meta Platforms (META) due Wednesday. Amazon (AMZN) and Apple (AAPL) follow on Thursday. Spending plans on artificial intelligence from all four tech titans will likely have an impact on Nvidia stock.
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Nvidia stock is trying to break a two-week sell-off but remains below the 50-day moving average. Shares came under pressure after earnings from Google-parent Alphabet (GOOGL) and electric vehicle giant Tesla (TSLA).
Is the pullback in the artificial intelligence giant a buying opportunity or a cause for caution? Emotions can quickly come into play and mess up decisions but time-tested trading rules improve the odds of success and help investors assess whether Nvidia stock is a buy now.
Demand Rising For AI Chips In Servers
On Tuesday last week, Nvidia announced a new AI Foundry service that will support Facebook parent Meta's (META) Llama 3.1 which will allow developers to build large language models using an open source model.
In June, Nvidia said it planned to roll out its most advanced artificial intelligence platform in 2026. The AI chip leader will also use next generation memory to improve process time.
Also in early June, Foxconn announced its plans to build an advanced computing center in Taiwan using Nvidia's Blackwell chips. Nvidia has teamed up with Foxconn to build data centers to expand into autonomous driving and the electric vehicles market. While leading electric-vehicle player Tesla (TSLA) uses Nvidia's chips, it plans to custom build them in-house in the future.
Nvidia Stock Split
Shares started trading on a split-adjusted basis on June 1o.
But the split could go beyond just lowering the price of each share. A lower price would make Nvidia a candidate for the Dow 30, which is a price-weighted index.
Previously, Apple (AAPL) and Amazon.com (AMZN) joined the Dow after stock splits.
The stock split will build further momentum for the AI chip leader and present what one analyst called a "generational buying opportunity."
First-Quarter Results Shine
Shares of Nvidia rose to record highs after fiscal first-quarter results beat estimates yet again on May 22. Sales grew 262% to $26 billion while earnings of $6.12 per share were 461% higher.
The AI leader has also teamed up with Microsoft to make the latest AI software available on Nvidia's graphic processing units.
Earlier, Nvidia shares rose past a handle buy point after the Google AI Conference showed different ways in which artificial intelligence will improve search. The search giant also previewed an Android feature that will alert users to scams during a phone call. While Google's tensor processing units are rivals to Nvidia's chips, Nvidia dominates the data center AI chips market.
Ahead of the earnings report, analysts at Baird, Susquehanna and Barclays increased their price targetson Nvidia.
Nvidia stock holds an Accumulation/Distribution Rating of D- on an A+ to E scale. That indicates few mutual funds have been buying the stock in recent weeks.
AI Products Drive Growth
Nvidia has earned a reputation for being a trailblazer. The company was an early pioneer in the graphics processors that many say drastically improved computer gaming. Along with gaming, Nvidia chips now are used in such industries as health care, automobiles and robotics.
In March 2023, generative AI took a leap forward with OpenAI's ChatGPT. According to Nvidia Chief Executive Jensen Huang, Nvidia's AI-capable supercomputer paved the way for the "iPhone moment of AI."
That helped Nvidia turn the tide on its results. It reported three quarters of declining year-over-year sales and four quarters of tapering earnings in late 2022 and early 2023. But then the company achieved record top- and bottom-line growth in the two most recent quarters.
Overall worldwide AI chip revenue will grow 26% from $53.4 billion in 2023 to $67.1 billion in 2024, according to a recent report from research firm Gartner. That is expected to double to $119 billion by 2027.
Nvidia's graphic processing units help accelerate computing in data centers and AI applications.
Top Ratings For Nvidia
Nvidia stock still boasts a best-possible score of 99 on its Composite Ratingand EPS Rating and a nearly ideal Relative Strength Rating of 98.
Nvidia also is one of the Magnificent Seven stocks that led the 2023 stock rally. The other stocks are Apple, Microsoft, Alphabet (GOOGL), Meta Platforms (META), Tesla and Amazon.com. Some of these tech titans are customers that rely on Nvidia's advanced chips. Nvidia is also one of the stocks that are forecast to outperform the market in 2024.
Is Nvidia Stock A Buy?
Chart patterns are a good way of telling when to buy or sell a stock. Nvidia's chart shows the stock has cleared a 92.22 buy point. The stock is already extended, according to IBD MarketSurge.
In 2023, AI stock Nvidia had a huge 239% run and it's up more than 125% so far this year.
Nvidia has climbed above profit-taking targets at 20% and 25% from 92.20 and an alternative buy point at 97.40. But the stock remains below the 50-day moving average. It's best now to wait for another base or follow-on buy point to make an initial position in the AI chip stock. Moreover institutional support can improve. The stock is not a buy right now.
Juan Carlos Arancibia also contributed to this article.
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