Nvidia (NVDA) rallied 239% in 2023 and hit an all time high of 505.48 just before the year ended. But can NVDA stock keep the ball rolling in 2024? And is it a buy right now?
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 of $11.22 for fiscal 2024, which ends this month. After that, Wall Street sees profit growth sharply decelerating to 67% in 2025.
Nvidia’s AI Products Drive Growth But Competitors Catch Up
Nvidia has earned a reputation for being a trailblazer. The company invented the graphic processing unit that many say drastically improved computer gaming.
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 IBD 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 IBD database.
Nvidia is also 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 “Magnificent Seven of 2024.”
Nvidia chips are now used in several industries besides gaming, such as health care, automobiles and robotics. So now NVDA stock 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. The stock also is on IBD Leaderboard.
But Nvidia’s chart shows the relative strength line has flattened after peaking in early June. It is still near 52-week highs. NVDA stock’s Relative Strength Rating had been at 99 before settling at 97.
In November, NVDA gained 15% and outperformed the Nasdaq’s gain of 10.70%. But in December, it finished 6% higher. That was slightly higher than the Nasdaq’s 5.5% gain for the month.
Is NVDA Stock A Buy?
More important, the Accumulation/Distribution Rating for NVDA stock is the worst possible E. That shows heavy selling among institutional buyers in the last 13 weeks.
Despite a strong third quarter and positive growth outlook, funds have not been net investors in the stock. That shows that there may be better opportunities out there.
The stock found support at the 50-day moving average since a November breakout but has since moved sideways. That could be a sign that Nvidia needs a very big catalyst to make a big move.
Still, 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 buy range from a double-bottom entry at 476.09 while also forming a flat base with an entry of 505.48.
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