Nvidia stock price analysis: risks and opportunities ahead of earnings
Nvidia stock has recently declined from its all-time high, reducing its market capitalization to $4.7 trillion. Despite concerns over potential risks such as the AI bubble, circular investments, reliance on hyperscalers like Microsoft and Meta, and growing competition from AMD and Chinese companies, the stock retains bullish indicators, staying above the 50 and 100-day EMAs. Analysts predict promising growth, with annual revenue expected to reach $207 billion in 2024 and $500 billion by 2030. Nvidia’s forward P/E ratio of 44 suggests it may still be undervalued. The company also benefits from increasing AI investments and is expected to announce earnings on November 19th.
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Nvidia's Market Cap Decline
Nvidia stock price has pulled back from its all-time high, causing a significant drop in its market capitalization. Investors have lost over $300 billion, with the market cap decreasing from over $5 trillion to $4.7 trillion. The key question remains: Is Nvidia stock a good buy ahead of its earnings report?
Technical Analysis of Nvidia Stock
The daily timeframe chart illustrates that NVDA stock has been in a downtrend in recent months. It has declined from a year-to-date high of $212 in October to the current level of $193. Investor concerns about the AI bubble and Nvidia's valuation metrics have contributed to this decline.
Additionally, the upcoming earnings report on November 19th has heightened market anxiety. Technical details reveal that NVDA stock is at the weak, stop & reverse point of the Murrey Math Lines after reaching the extreme overshoot level last month. On the bright side, the stock remains above the 50-day and 100-day Exponential Moving Averages (EMA), signaling some bullish control. A resurgence above $212, the current year's high, could lead to gains toward $250, while a drop below $175, a pivotal S/R point, may indicate further downside risk to $150.
NVDA's Potential Risks
Nvidia faces major risks as it approaches its earnings report. One risk lies in circular investments, where capital cycles between AI companies Nvidia has invested in. For instance, CoreWeave—a major data center operator partially owned by Nvidia—has become one of its largest buyers.
Nvidia also plans to invest $100 billion in OpenAI, which will, in turn, purchase Nvidia’s chips. Additionally, Nvidia heavily relies on hyperscalers like Microsoft, Google, and Meta Platforms, all of which are under pressure to demonstrate ROI from their AI investments. If any of these companies scale back on AI spending, Nvidia's business could face a significant impact.
Finally, the competitive environment is intensifying, with AMD capturing market share and Chinese players like Alibaba performing well.
Nvidia's Tailwinds and Revenue Growth
Despite the challenges, Nvidia stock has strong tailwinds. AI investments are showing robust growth, exemplified by Anthropic, which has pledged $50 billion in US investments that will largely benefit Nvidia.
Investors remain optimistic about Nvidia's performance. Analysts project annual revenue of $54 billion, a 56% increase from the previous year. Revenue is expected to grow to $207 billion in 2024 and could surpass $500 billion by 2030. Furthermore, Nvidia’s forward price-to-earnings ratio of 44, and its non-GAAP multiple of 42, are both below the five-year averages, suggesting the company might be undervalued despite its nearly $5 trillion market cap.