Nvidia (NVDA) is on a tear after breaking out of a flat base Jan. 8. The company introduced new products at the consumer electronics conference in Las Vegas this week.
NVDA stock has gained nearly 10% in January alone. Is it a buy right now?
The stock is on pace to replace Amazon (AMZN) as the fourth-largest company by market cap.
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The leading maker of artificial intelligence chips disclosed Monday new GeForce graphic processors for AI-enabled laptops and PCs. It also said electric vehicles are using its automated driving system. Li Auto (LI) and other EV makers have selected Nvidia Drive Thor for their fleets.
Shares broke out on the news and have rallied 5% from a buy point of 505.48. That puts the stock on track to becoming the fourth-biggest company by market cap.
The leader in AI chips rallied 239% in 2023 and hit an all-time high 505.48 just before the year ended. Then it topped, the 505.48 buy point of its base in heavy volume on Jan. 8.
The company is expected to release its fourth-quarter results on Feb. 21.
NVDA Stock: Third-Quarter Earnings
Shares broke out of a double-bottom base just ahead of third-quarter earnings in November.
A week before reporting results, Nvidia announced at the SC23 supercomputing conference in Denver a new artificial intelligence computing platform and an advanced data-center chip. That sent the stock to its all-time high.
Despite a blockbuster quarter, shares fell after the earnings report. The company said profits came in at $4.02 a share on sales of $18.12 billion for the period that ended Oct. 29. Analysts polled by FactSet had expected earnings of $3.37 a share on sales of $16.19 billion.
Compared with the year-ago quarter, Nvidia earnings soared 593%, while sales saw a 206% spike. The period was also the second-straight quarter in which the chip leader reported triple-digit growth in both metrics.
Demand from data centers was the chief reason. Nvidia’s data-center sales jumped 279% from the year-earlier period to a record $14.51 billion. Data-center sales also increased 41% from the second quarter.
When it filed its earnings report, Nvidia projected sales of $20 billion for the fourth quarter ending in January. That translates to 231% growth from the prior year, and came in ahead of analyst views for $17.96 billion.
NVDA stock analysts now expect 236% growth in per-share earnings to $11.22 for fiscal 2024, which ends this month. After that, Wall Street sees profit growth sharply decelerating to 67% in fiscal 2025.
AI Products Drive Growth But Competitors Catch Up
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, generative AI took a leap with OpenAI’s ChatGPT. According to the company, Nvidia’s AI-capable supercomputer paved the way for the “iPhone moment of AI.”
That helped Nvidia turn the tide on its results. After three quarters of declining year-over-year sales and four quarters of tapering earnings, the company achieved record top- and bottom-line growth in the two most recent quarters.
But other chip companies have been fast to catch up. In December, Advanced Micro Devices (AMD) launched a new AI chip that competes with Nvidia’s advanced products.
Top Ratings For Nvidia
Nvidia stock shows exceptional technical strength and boasts a best-possible score of 99 on both its Composite Rating and EPS Rating. Its Relative Strength Rating of 97 also shows that it outperforms the vast majority of stocks in the Investor’s Business Daily database.
Nvidia also is one of the Magnificent Seven stocks that led the 2023 stock rally. The other stocks are Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), Meta Platforms (META), Tesla (TSLA) and Amazon (AMZN). Some of these tech titans are customers that rely on Nvidia’s advanced chips. It is also one of the “Magnificent Seven of 2024.”
NVDA stock currently ranks first in the fabless semiconductor group, which holds 39th place among IBD’s 197 industry groups. The AI stock frequently appears on the IBD 50, IBD Sector Leaders and Tech Leaders lists. Further, the stock is on IBD Leaderboard.
In November, NVDA stock jumped 15% and outperformed the Nasdaq’s 10.70% gain. But in December, it finished up 6%, just above the Nasdaq’s 5.5% advance for the month.
Is NVDA A Stock A Buy?
Critically, the Accumulation/Distribution Rating for NVDA stock is D+. That shows that interest among institutional buyers in the last 13 weeks has waned.
Despite a strong third quarter and positive growth outlook, funds have not been net investors in the stock. That shows there may be better opportunities out there.
Still, 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 set to double by 2027 to $119 billion
Further, Bank of America analyst Vivek Arya reportedly has a price target of 700 for the AI leader. Bernstein analyst Stacy Rasgon also finds that company’s valuation attractive and has the same price target.
NVDA stock is a buy right now. Shares are in buy range from a flat base’s 505.48 entry.
| COMPANY | TICKER | MARKETCAP IN BILLIONS |
|---|---|---|
| APPLE | AAPL | $2,879 |
| MICROSOFT | MSFT | $2,793 |
| ALPHABET | GOOGL | $1,764 |
| AMAZON | AMZN | $1,564 |
| NVIDIA | NVDA | $1,313 |
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