Artificial intelligence chip leader Nvidia (NVDA) again broke out at a proper buy point of 140.76 on Wednesday and rose to an all-time high on Thursday. But should investors buy Nvidia stock now?
The stock has shaken off last week’s losses, when Nvidia finished 4.3% lower amid earnings from Magnificent Seven companies Microsoft (MSFT) and Meta Platforms (ALAB), reported a strong third quarter. That helped the stock score first place in market cap and overtake Apple (AAPL).
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How Nvidia Is Injecting AI Into The Health Care Industry
Nvidia’s market cap was $3.57 trillion while Apple’s stood at $3.37 trillion, as of Wednesday’s closing prices.
Nvidia continues to outperform and has an ideal EPS Rating of 99, while the stock holds a Composite Rating of 97. Its stock is on the IBD Leaderboard, IBD SwingTrader and IBD 50.
Though the stock has beat 97% of other stocks in Investor’s Business Daily’s database, funds have been wary of buying the stock lately. The Accumulation/Distribution Rating, which measures fund purchases over the last 13 weeks, is just D- on an A+ to E scale.
On Monday, news that the company will replace Intel (INTC) in the Dow Jones Industrial Average on Nov. 8 lifted the stock.
Nvidia will become the fourth Magnificent Seven stock to join the Dow Jones industrials. The others are Apple, Amazon.com (AMZN) and Microsoft.
Nvidia’s Third-Quarter Earnings Ahead
Nvidia’s fiscal third-quarter results are due Nov. 20. Analysts polled by FactSet expect sales to increase 122% to $30 billion and earnings of 68 cents per share, which would be 152% higher than the prior year.
Recent news shows demand for its AI chips remains high. The chief investment officer at UBS Global Wealth Management noted that “Big Tech’s combined capex [capital expenditure] spending of $218 billion this year and another $254 billion in 2025 bodes well for the AI investment thesis.”
Meanwhile strong AI data center demand helped Vertiv (VRT) beat earnings estimates for its September quarter.
In October, Chief Executive Jensen Huang said that a design flaw in its next-gen Blackwell chip had been fixed. Earlier, yields were low but AI-chip maker Taiwan Semiconductor (TSM) helped “recover from that yield difficulty and resume the manufacturing of Blackwell at an incredible pace.”
Taiwan Semiconductor Reports Strong Profits
Nvidia stock cleared a trendline entry near 139.60 after Taiwan Semiconductor profits surged 54.2% year over year. Taiwan Semi is a big supplier of AI chips to Nvidia and Apple (AAPL).
But Nvidia shares fell nearly 5% after chip-gear leader ASML (ASML) disappointed investors with its outlook.
Shares also fell on news that the company’s advanced chip exports could be up against more restrictions.
Nvidia Stock: AI’s Total Addressable Market
In September, consulting firm Bain said the total addressable market for AI hardware and software will grow 40% to 55% for at least the next three years. Demand for Nvidia’s next generation graphic processing units, the GB200, is expected to reach 3 million in 2026 vs. 1.5 million for its H100 units in 2023.
Elsewhere, analysts at Bernstein said that after its phenomenal growth, sustainability is the main question Nvidia faces, but the “time to worry is clearly not now.”
On Sept. 3, Nvidia fell sharply below the 50-day moving average and saw its largest one-day market cap loss for any U.S. company, according to Dow Jones Markets Data.
Earnings From AI Giants Moves Nvidia Stock
Results from other AI leading companies have influenced the stock. Memory chipmaker Micron (MU) cited robust AI demand, which gave Nvidia stock a lift while Oracle (ORCL) Chairman and Chief Technology Officer Larry Ellison said his company is building a data center with “acres of Nvidia GPU clusters for training large language scale AI models.”
But Broadcom (AVGO) results weighed on Nvidia. Broadcom’s sales and earnings beat estimates but its sales outlook disappointed.
The stock fell 6.4% after earnings on Aug. 28 even though Nvidia beat analyst estimates.
Nvidia’s Second-Quarter Results
In August, Nvidia reported earnings that beat Wall Street views. Sales of $30.04 billion were higher than $28.7 billion analysts expected and came in 122% ahead of the year-earlier quarter.
Earnings also came in above views of 65 cents, at 68 cents per share. That was 152% higher than the prior year. The artificial intelligence chip leader also guided higher for the current quarter with sales of $32.5 billion vs. views of $31.7 billion.
Earnings have moved Nvidia stock in 2023 and 2024 and that is shining proof of why fundamental performance is one of the pillars of The IBD Methodology. In 2023, Nvidia had a huge 239% run.
But fundamentals make up just one of four IBD pillars of investing — the others are a stock’s technical strength, which indicates the stock’s performance vs. other stocks, the market direction and risk management.
Huang sold $580 million of Nvidia stock from June 14 through Aug. 9, based on a trading plan.
AI Products Drive Growth
Nvidia’s graphic processing units help accelerate computing in data centers and AI applications. The company was a pioneer in graphics processors 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 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 five most recent quarters.
Is Nvidia Stock A Buy?
Chart signals and technical measures can help investors assess whether Nvidia stock is a buy now.
Nvidia has broken out at a conventional buy point of 140.76 in higher volume. Shares are in a buy zone that goes up to 147.80. That makes the stock a buy.
But investors should be wary of earnings risk for the AI chip leader’s fiscal third-quarter report, which is about two weeks away.
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