Nvidia (NVDA) is a giant in data centers and gaming, with AI chips a growth opportunity. Is Nvidia stock a buy after clearing a new buy point and nearly doubling so far this year?
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Semiconductor, AI News
On May 1, Evercore analysts called Nvidia a “top pick” in a note to clients. Rosenblatt Securities analysts also named NVDA as one of seven chip stocks likely to benefit from higher tech spending around artificial intelligence (AI).
In March, chipmaker Nvidia announced various initiatives to broaden its reach in AI, including partnerships and new products.
“We are at the iPhone moment of AI,” Chief Executive Jensen Huang said at the time.
In February, Nvidia delivered a beat-and-raise report driven by its data center segment, which includes AI chips.
In the tech industry’s fierce battle for AI dominance, the advanced chips needed for “generative AI” such as the ChatGPT chatbot are key.
For those looking for top large-cap stocks to buy now, here’s a deep dive into NVDA stock.
Nvidia Stock Technical Analysis
On May 1, Nvidia stock popped 4.2% amid Wall Street’s bullishness about AI growth opportunities. Shares topped a 281.20 buy point from a three-weeks-tight pattern. The stock closed the trading session within buy range, which stretches to 295.26.
IBD named Nvidia its Stock of the Day on May 1 as the chipmaker broke out. Investors could use the latest Nvidia breakout as an opportunity to start a small position or to grow an existing stake. However, the current market trend warrants a cautious approach to investing.
The chip stock earns a spot on the prestigious IBD Leaderboard. In April, NVDA stock hit the 20% profit-taking goal from a previous breakout.
Year to date, Nvidia shares are up nearly 98% after crashing in 2022.
NVDA earns a near-perfect IBD Composite Rating of 98. In other words, Nvidia stock has outperformed 98% of all other stocks in IBD’s database in terms of combined technical and fundamental metrics.
Investors generally should focus on stocks with Comp Ratings of 90 or even 95 and above. Nvidia stock often earns a spot on the IBD 50, Big Cap 20 and Sector Leaders lists.
The relative strength line made a new high May 1 as the semiconductor stock broke out.
The RS line is almost back near November 2021 highs, the IBD MarketSmith charts show. A rising RS line means that a stock is outperforming the S&P 500. It is the blue line in the chart shown.
The IBD Stock Checkup tool shows that Nvidia stock carries a Relative Strength Rating of 98, meaning it has outperformed 98% of all stocks in IBD’s database over the past year.
The iShares PHLX Semiconductor ETF (SOXX) holds both Nvidia stock and AMD stock.
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Nvidia Earnings
Nvidia’s EPS Rating is 63 out of 99 and its SMR Rating is a B, on a scale of A to a worst E. The EPS rating compares a company’s earnings growth to other stocks. Its SMR Rating gauges sales growth, profit margins and return on equity.
On Feb. 22, Nvidia beat Wall Street’s earnings target for its fiscal fourth quarter and guided higher for the current period.
The Santa Clara, Calif.-based company earned 88 cents a share on sales of $6.05 billion. Year over year, Nvidia earnings dropped 33% while sales sank 21%.
Data center revenue rose 11% to $3.62 billion, fueled by demand for AI chips. However, gaming chip sales remained weak, falling 46% to $1.83 billion.
For the full year, Nvidia earnings fell 25% per share on basically flat revenue.
The chip firm next reports earnings on May 24, for its fiscal first quarter. Analysts expect another weak quarter, but they then see Nvidia earnings rebounding 36% for the entire year, on an 11% sales gain.
Out of 47 analysts covering NVDA stock, 34 rate it a buy. Thirteen have a hold and no 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’s expanding in AI chips, used in supercomputers, data centers and drug development.
Nvidia’s GPUs act as accelerators for central processing units, or CPUs, made by other companies.
In addition, Nvidia chips are used for Bitcoin mining and self-driving electric cars.
Nvidia has made a big push into metaverse applications.
Fabless chip stocks include Qualcomm (QCOM), Broadcom (AVGO) and Monolithic Power Systems (MPWR).
Currently, the fabless group ranks No. 12 out of 197 industry groups.
For the best returns, investors should focus on companies that are leading the market and their own industry group.
Is Nvidia Stock A Buy?
On a fundamental level, Nvidia earnings and sales are expected to rebound this year.
The chipmaker is expanding in growth areas such as data centers, including artificial intelligence, or AI; automated electric cars, and cloud gaming. The adoption of the metaverse and cryptocurrencies could further stoke demand for Nvidia chips.
However, macroeconomic uncertainties and risk of global recession linger.
NVDA stock continues to surge after a strong comeback in 2023. Shares broke out May 1 and are currently in the proper buy range. The chip stock hit a 20% profit goal in April from a prior breakout.
Bottom line: Nvidia stock is a buy. As a leading chipmaker with exposure to top end-markets, Nvidia is always one to watch.
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