Key Takeaways:
- Nvidia stock NVDA established a new record high.
- The spike in price left a gap on the chart, which could hint at a looming correction.
- Latest Nvidia earnings report beat expert expectations.
YEREVAN (CoinChapter.com) – Nvidia is a company specializing in manufacturing graphics processing units (GPU) and AI technologies. The corporation stock NVDA opened the May 26 session with a nearly 27% jump, changing hands at $380 after peaking at a record $394 hours prior.
NVDA might see a correction despite the rally
Moreover, NVDA brought its year-to-date gains to 170% and reinstated its name as one of the best-performing stocks in the S&P 500 since January.
However, the price surge created a gap, which could mean a correction ahead, as “gaps must be filled.” If a correction is in store for NVDA, a likely target would be $335, a previous record established in Nov 2021.
In detail, gaps typically occur because of underlying fundamental factors. For example, if a company’s earnings are much higher than expected, then the company’s stock may gap up the next day.
This means the stock price opened higher than it closed the day before, leaving a gap. Nvidia was not an exception. The gap could have occurred on the back of a bullish Q1 earnings report for its fiscal 2024, released on May 25.
Nvidia report beats expert estimates.
Nvidia reported a stronger-than-expected forecast. The corporation said it expected sales of about $11 billion, plus or minus 2%, in the current quarter, more than 50% higher than Wall Street estimates of $7.15 billion. Also, Nvidia’s data center group reported $4.28 billion in sales versus expectations of $3.9 billion, a 14% annual increase.
As previously reported, experts did not expect Nvidia’s bullish streak to continue once the Q1 report saw light. Investment research platform Business Quant assessed the stock on May 23, concluding that Nvidia’s “revenue growth momentum will falter in its upcoming earnings report.”
Also read: Is Nvidia stock (NVDA) still a BUY or a SELL after 180% rally?
Another analytical company Cavenagh Research backed Business Quant’s assessments, forecasting a sharp decline upon the mentioned report release.
I believe the company may still miss consensus estimates with regard to sales by ∼6% and earnings by ∼14%, likely prompting a sharp drop for the stock, as the post-2025 AI mania meets early 2023 earnings reality.
reported the company.
Demand for Nvidia products grows.
Notably, Nvidia isn’t directly involved in AI by producing products or services that utilize AI technology. Rather, the company produces specialized semiconductors used by such companies in producing said AI programs. Thus, an argument can be made that Nvidia’s chips serve as the backbone of the AI sector.
2023 promised impressive growth in Nvidia’s data center and higher-end chip-making division. Moreover, the global AI market size was estimated at approximately $120 billion in 2022 and is expected to hit nearly $1,6 trillion by 2030.
Chipmaker Corporation’s CEO Jensen Huang also asserted the company saw “surging demand” for its data center products.
The computer industry is going through two simultaneous transitions — accelerated computing and generative AI. A trillion dollars of installed global data center infrastructure will transition from general-purpose to accelerated computing as companies race to apply generative AI to every product.
noted Huang in the report.
