Nvidia (NVDA) broke a key chart level on Friday amid reports of its response to a new proposal to limit chip sales.
Shares fell below their 50-day moving average early Friday. The stock is also headed for a 3% loss this week. The 50-day average is almost at the same price level as the 10-week moving average on IBD MarketSurge's weekly chart.
↑ X NOW PLAYING Nvidia Has Dominated The AI Revolution. Can The Chipmaker Stay At The Front Of The Pack?Meanwhile, Nvidia's executives tackled a possible chip ban from the outgoing Biden administration. According to unconfirmed reports, the administration is set to announce restrictions on exports to a majority of countries and a ban on a few like China. A few countries would be exempt. The new rules could be issued as early as Friday.
"The extreme 'country cap' policy will affect mainstream computers in countries around the world, do nothing to promote national security, but rather push the world to alternative technologies," Ned Finkle, Nvidia's vice president of government affairs, told Barron's.
Nvidia stock is on the IBD Leaderboard. It is also a top AI stock to watch.
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The stock has beaten 93% of other stocks in price performance in Investor's Business Daily's database. Volume is beginning to increase, which is a sign that funds are stepping in to scoop shares. But going by its Accumulation/Distribution Rating of D-, fund participation is still low. The rating measures price and volume action over the last 13 weeks.
The relative strength line, which compares the stock with the S&P 500 index, is at a new high. The indicator, which compares the stock with the S&P 500, is showing a blue dot on the IBD MarketSurge weekly chart, which indicates a 52-week high for the line while the stock trades near a buy point.
On Monday, Huang said the "ChatGPT moment for general robotics" was near, and said Nvidia is launching an AI platform, Cosmos, to train robots for autonomous vehicles and humanoids, and blueprints for agentic AI. Cosmos is designed for use in video search and summarization for analyzing large quantities of video and images.
Nvidia says Cosmos can use text, video and images and create "virtual world states" as videos to provide training. Huang also showed Nvidia's smallest AI supercomputer, which "runs the entire Nvidia AI stack," and the latest Blackwell graphics card for gaming.
But investors were eager for updates on Nvidia's Blackwell chip ramp up and early indications for its next chip, Rubin. Nvidia's data center business is expected to generate $113 billion in revenue for the year that ends in January, according to FactSet — more than the total revenue estimate for any other chip company. That makes its other ventures a sideshow.
Highlights for 2024
New findings showed that Nvidia was the most bought stock by retail investors in 2024, as they poured nearly $30 billion into the AI stock in for the year as of Dec. 17, according to Vanda Research. That takes the crown from Tesla (TSLA), which was most popular stock among retail investors during 2023. Nvidia is on track for more than twice Tesla's 86% gain so far this year.
Nvidia stock hit a $3 trillion market cap, rivaling Apple (AAPL). It also replaced Intel (INTC) in the Dow Jones Industrial Average in November, becoming the fourth Magnificent Seven stock to join the list of blue chips. The others are Apple (AAPL), Amazon.com (AMZN) and Microsoft (MSFT).
Are These Magnificent Seven Stocks A Buy Now? Alphabet | Amazon | Apple | Meta | Microsoft | Nvidia | Tesla
December was a challenging month for Nvidia investors.
Nvidia stock suffered losses when reports stated that Magnificent Seven leader Microsoft (MSFT) is not "chip supply constrained." In its Securities and Exchange Commission filing earlier this year, Nvidia had disclosed that one customer accounted for 13% of its fiscal first-quarter revenue. UBS analyst Timothy Arcuri believes that customer was Microsoft.
On Dec. 12, news that the Supreme Court had dismissed Nvidia's appeal in a securities fraud lawsuit from shareholders pressured the stock. The 2018 suit was triggered when Nvidia's revenue took a hit amid a crash in cryptocurrencies and sought to investigate how much of its sales depended on digital currency.
Shares also fell after Broadcom's results showed strong demand for its AI processors. Broadcom competes with Nvidia in data center AI networking gear and indicated that two large customers were developing their own next-generation AI processors using Broadcom's chips. Broadcom is also designing an AI chip for Apple (AAPL).
But Morgan Stanley analyst Joseph Moore noted that "based on conversations with customers," he anticipates the biggest users of application-specific integrated circuits, or ASICs, to shift back to graphic processing units, or GPUs.
Shares gained nearly 4% on Dec. 20 after Moore named Nvidia a "top 2025 pick" but trimmed his price target on the stock to 166 from 168.
The analyst does not expect delays in the Blackwell chip production. Moore said that while a slowdown in the older Hopper chip is expected, that would be welcome news as that will make more high-end memory chips available for its Blackwell line.
While Nvidia's GPUs can be used for several AI tasks, ASICs that its rivals are focusing on are meant to fulfill a single purpose. Mizuho analyst Jordan Klein noted that while "custom silicon will quickly gain share each year from GPUs, GPUs will be dominant for training purposes."
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On Dec. 10, Taiwan Semiconductor said that sales grew 34% annually in November but declined 12.2% from October. From January to November, sales grew 31.8% compared with the same period in 2023. That likely pressured Nvidia, which fell 2.7%.
Shares also fell 2.6% on Dec. 9 amid news that China's State Administration for Market Regulation is investigating whether Nvidia has violated its antimonopoly laws. Earlier, shares came under pressure after President-elect Donald Trump said he plans big tariffs on goods from China, Mexico and Canada.
But Bernstein Research analyst Stacy Rasgon noted that "raw semiconductor" imports from these countries were tiny and would not hurt Nvidia. The analyst did say the tariff raises some concerns that there may be more broad-based action that could hurt the semiconductor industry and even leaders like Nvidia.
Mizuho analyst Jordan Klein noted that the "restrictions seem in line or less severe than anticipated." Piper Sandler analysts also stated there were fewer entities on the restriction list than expected.
In November, analysts at Piper Sandler projected a 20% upside for the stock and raised their price target to 175 from 140. Nvidia is positioned to gain most from the increase in the total AI accelerator market, which Piper Sandler sees at $70 billion in 2025.
Melius Research analysts also raised their price target to 185 from 165 and maintained their buy rating.
For Nvidia, its earnings growth is its strong point.
The AI chip behemoth continues to be a stock market leader and has an ideal Earnings Per Share Rating of 99, while the stock also shows all-around strength with a Composite Rating of 98.
According to FactSet data, Nvidia ranks first among S&P 500 companies for revenue and earnings growth estimates through 2026.
Analysts expect a compound annual growth rate of 5.7% in sales for the S&P 500 with 13.8% in earnings per share over two years. But they see Nvidia's two-year compound growth reaching 35.5% in sales and 35.1% in earnings per share.
Third-quarter sales came in at $35.08 billion with earnings of 81 cents per share. Analysts polled by FactSet had estimates of 75 cents per share on sales of $33.17 billion. Sales also beat the AI chip leader's outlook of $32.5 billion for the quarter.
Sales nearly doubled from the prior year, when Nvidia reported $18.1 billion in revenue.
Earlier, chip lithography gear maker ASML (ASML) maintained its 2030 sales target of $46.3 billion at the lower end. ASML makes chipmaking gear. The announcement followed a warning on Oct. 15, when ASML anticipated slower demand in 2025. That sent Nvidia stock nearly 5% lower on the day.
ASML Chief Executive Christophe Fouquet said the company expected that it would be able "to scale (extreme ultraviolet lithography) technology into the next decade" and contribute to the artificial intelligence opportunity.
Analysts at Jefferies Group believed that the slowdown in chip demand appeared to be temporary. ASML's lithography machines are used by foundries that supply chips to Nvidia.
Meanwhile, bullish trends for artificial intelligence make Nvidia a must-watch. In September, consulting firm Bain said the total addressable market for AI hardware and software will grow 40% to 55% annually for at least the next three years.
Demand for Nvidia's next generation graphics processing unit, the GB200, is expected to reach 3 million in 2026 vs. 1.5 million for its H100 units in 2023.
On Sept. 3, Nvidia fell sharply below the 50-day moving average and saw the largest one-day market cap ever loss in dollar terms for any U.S. company, according to Dow Jones Markets Data.
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Nvidia's graphics 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 chips paved the way for the "iPhone moment of AI."
That helped Nvidia turn the tide on its results. It had 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 six most recent quarters.
Looking at chart signals and technical measures can help investors assess whether Nvidia stock is a buy now.
Bank of America analyst Vivek Arya called Nvidia a "generational opportunity" in October and has a price target of 190.
Nvidia is also well positioned to weather higher interest rates in 2025 than some rivals, according to Kathleen Brooks, research director at brokerage firm XTB, thanks to its high profit margins.
But the stock has fallen below the 50-day moving average. That is a sell signal. If it rebounds from that level in higher volume, it could trigger an early entry. A move back above the 146.54 buy point also would make it a buy.
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