Nvidia (NVDA), a giant in data centers and gaming, is supercharging investor interest in artificial intelligence. Is Nvidia stock a buy after rebounding from a key level?
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Semiconductor, AI News
On Oct. 2, investment bank Goldman Sachs added the artificial intelligence (AI) chipmaker to its “conviction buy” list of top stock picks.
Nvidia smashed lofty expectations for earnings in late August, and guided higher.
Earlier that month, Nvidia unveiled its next-gen AI super chip: the GH200, coming next year.
Nvidia taps the emerging market for generative AI. Generative AI can create content, including written articles, from simple phrases by analyzing vast amounts of data. It can also write programming code.
For those looking for the top large-cap stocks to buy now, here’s a dive into the AI chip leader.
Nvidia Stock Technical Analysis
Nvidia stock is poised to offer a 502.66 buy point from a new base Friday after the close.
The chip stock cleared an early entry with its decisive move above the 50-day moving average, the IBD Leaderboard chart analysis shows. NVDA stock gained 2.4% to 457.62 in light volume, amid encouraging action for stocks at large.
Shares of the chipmaker achieved a record high in late August on AI-fueled growth, then pulled back in the recent stock market correction.
After a painful 2022, NVDA stock has soared nearly 212% year to date. It mostly held up better than growth stocks at large during recent market selloffs.
The relative strength line has risen to highs with the stock, 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.
NVDA earns a best-possible IBD Composite Rating of 99. In other words, Nvidia stock is in the top 1% of all stocks in terms of 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 IBD Stock Checkup tool shows that NVDA carries a Relative Strength Rating of 99. That means it has 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 Earnings
Nvidia’s EPS Rating is 93 out of 99 and its SMR Rating is an A, 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 Aug. 23, the chip giant delivered another big beat-and-raise report, driven by its data-center business.
Year over year, Nvidia earnings rocketed 429% in Q2, while sales soared 101%.
The Santa Clara, Calif.-based company’s data-center revenue surged 171%. The data-center business includes the A100 and H100 AI chips needed for AI applications.
For the current third quarter, Nvidia guided sales of $16 billion, up 170%, and well above estimates.
“A new computing era has begun,” Chief Executive Jensen Huang said in a news release. “Companies worldwide are transitioning from general-purpose to accelerated computing and generative AI.”
For the full year, analysts now expect Nvidia earnings to rebound 219% as sales jump 103%. Last year, Nvidia earnings fell 25% per share. Nvidia’s fiscal year ends in January.
Out of 51 analysts covering NVDA stock, 49 rate it a buy. Three 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. It’s working on “supercomputers” combining its own CPUs and GPUs.
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. 53 out of 197 industry groups. Fabless companies design the hardware while outsourcing the manufacturing to a third-party firm.
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 is poised for explosive growth. Earnings should more than triple this fiscal year, driven by booming chip sales for data centers and artificial intelligence.
The fabless chipmaker is expanding in other growth areas, such as automated electric cars and cloud gaming, as well. 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 has staged a massive comeback, more than tripling so far this year. It is poised to offer a new 502.66 buy point and already provides an aggressive entry.
Bottom line: Nvidia stock is a buy right now. As a chip company with exposure to top growth markets, Nvidia is always one to watch.
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