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Nvidia stock NVDA nearly tripled year-to-date, outperforming most stocks in the S&P 500.
The stellar year’s start reflected the heightened demand for AI-related technology.
Experts predict a steep decline to follow the Q1 earnings report, due on May 24.
YEREVAN (CoinChapter.com) – Nvidia is a company specializing in manufacturing graphics processing units (GPU) and AI technologies. The corporation stock NVDA has rallied nearly 180% since bottoming out in Nov 2022 and traded at $309 on May 23, establishing its name as one of the best-performing stocks in the S&P 500 year-to-date.
Moreover, NVDA fell only 10% short of its all-time high of $346 in Nov 2021, and many experts gave the stock a strong BUY signal in Q1 2023.
Nvidia stock (NVDA) price action. Source: TradingView.com Bullish factors for NVDA
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.
AI technologies are estimated to grow tenfold by 2030. Source: PrecedenceReasearch.com
Considering the booming potential in the sector, NVDA could seem like a BUY ahead of Q3 2023.
However, while the long-term prognosis favors the sector as a whole, it’s important to remember the possible short-term ramifications of another market downturn. Nvidia largely depends on the overall market incentive in the technology stocks sector.
Moreover, several research companies consider the stock largely overbought; here’s why.
Nvidia stock is “dead money walking,” experts say
Investment research platform Business Quant assessed the stock on May 23, a day ahead of its quarterly report release. The platform concluded that Nvidia’s “revenue growth momentum will falter in its upcoming earnings report.”
Business Quant also noted that the current recessionary environment is likely to negatively affect the trajectory of rapidly-growing companies such as Nvidia.
The chipmaker and its investors were banking on the successful commercial release of its RTX 40-series GPUs, for the company to be able to maintain its breakneck pace of growth. But latest reports reveal that it’s not all smooth sailing for the chipmaker.
read the report.
Another analytical company Cavenagh Research backed Business Quant’s assessments, forecasting a sharp decline upon the report release on May 24.
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.
Conclusion
Moreover, the news platform SeekingAlpha put together 33 analyst opinions on Nvidia for an FY 2024 assessment. The projections anticipate that the chip designer’s total sales for the first quarter of 2023 will likely fall between $6.31 billion and $6.71 billion, with the average estimate being $6.52 billion.
Using the average analyst consensus estimate as a reference point, it is suggested that Nvidia’s Q1 sales may contract by about 21.3% YoY as compared to the same period in 2022 – quite a steep drop for a company whose shares have outperformed the S&P 500 by about x10 YTD.
concluded the consensus.
Thus, if potential investors eye NVDA as a strong 2023 performer, they should wait for the Q1 report results tomorrow and analyze them carefully before jumping into the BUY team. Conversely, if they plan to dump their Nvidia shares, 10% below the peak might be a good opportunity.
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