Is NVDA Stock a Good Investment?
NVDA is a stock that has gained significantly since the beginning of the year. While the company is known for its GPU platform, it is also one of the few stocks that has gained in artificial intelligence. Combined with its strong price, NVDA looks to be a good investment.
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Cup & Handle Breakout
NVDA stock has been trading sideways for months. It went into a bear market after October 2018. It has recouped from that sell-off, though. It climbed up 28% off its lows. However, it has yet to break out of its cup and handle pattern. It's time for the bulls to attack its neckline.
A cup and handle pattern occurs when a stock is rallying for three to six months before moving sideways for a period of months. The handle phase is the final consolidation before the big breakout. This period can last as long as eight weeks, but is usually no longer than nine months.
This pattern has been used in every market cycle for decades. William O'Neil, a legend of growth investing, has even endorsed it. However, O'Neil admitted that cup and handle patterns aren't precise science.
The handle portion of the pattern forms after the right side of the cup, which is a relatively shallow rise. The handle should be a minimum of five days long and ideally retrace a third of the cup's advance. The handle is typically accompanied by a volume increase.
When the handle is formed, the cup is ready to move back up. However, if the handle doesn't retrace enough, then the breakout isn't likely.
Generally, a cup and handle pattern starts after a stock has rallied at least 30%. This means the cup should have a depth of at least 15%, and it should have a round shape. However, cup and handle patterns can vary greatly. Some can last as long as seven or 75 weeks.
As with other chart patterns, the cup and handle pattern can be a useful indicator for trading profits. However, it's important to recognize that the chart pattern has limitations.
NVDA stock price is up sharply from its lows
NVDA stock price is up sharply from its lows, but investors are wondering whether to
buy, sell or hold now. The stock has been up 60% since hitting our buy-in target of around $100.
However, NVDA is still over 50% down from its all-time highs, and Wall Street has yet to downgrade the stock. Instead, management has been trying to assure investors that the forward outlook is favorable.
The company also needs to get permission for its new high-performance chips to be exported to China and Russia. The US government recently announced a clampdown on semiconductor exports to China. This may affect chip demand, resulting in NVDA stock declining further.
Nvidia's Q2 revenue was up a little from the year prior, but the company still lost a lot of money. Its gross profit dropped 30.8%, and its EPS was down 41.7% year over year to $0.77 for the quarter ending October 2022.
Nvidia also needs to find a way to relieve its data center customers from the US export restrictions. Last week, it reached out to the U.S. Government to discuss the situation. The company informed the government that it needed to change its licensing requirements for its A100 AI-HPC chips.
Nvidia's CEO, Jensen Huang, assured investors that the A800 chips will fulfill the export requirements. He also mentioned that Nvidia is investing in new uses for its chips. Share repurchases are an excellent way for the company to return cash to shareholders. Repurchasing shares reduces the total shares outstanding, which increases earnings per share. The company had a growing balance of cash and short-term investments through 2021.
Investors who are worried that NVDA will decline further should consider selling shares at current levels. The stock is trading at a discount to its 20-day moving average.
NVDA's GPU platform makes NVDA stock a clear winner
NVDA stock has been on a remarkable rise since 2012. In the past year, NVDA stock has outperformed 61% of the stocks in the S&P 500 and 84% of the stocks in the Dow Jones Industrial Average.
In the past month, NVDA stock has bounced off $270 twice. This represents a critical support level for NVDA and is a good entry point.
The graphics processing unit (GPU) was initially designed to render images. Today, it can perform much more. Nvidia's chips are found in eight of the top 10 supercomputers.
The company's underlying growth drivers remain strong. Nvidia has achieved high double to triple digit annual earnings growth for the last eight consecutive quarters. The company is betting on the data center as its primary growth driver.
During the third quarter, Nvidia reported record top-line results. The company saw revenues increase 3.2x on a comparable-period basis. Nvidia's profit margins rose 126% year over year.
Nvidia's EPS is expected to grow 51.2% year over year in the second quarter and 15.4% for the year. Over the next five years, NVDA's EPS is expected to grow 22.2% per year. The stock currently has a price-to-sales ratio of 25.
The company has also managed to overcome strong headwinds. Over the past few years, geopolitical concerns and US restrictions have negatively affected Nvidia.
Supply chain disruptions have also negatively affected the company. However, management noted that late-2018 inventory headwinds are mostly behind them. Nvidia is a leading chipmaker and the only company to control the entire GPU market. The company's cutting-edge innovation in the chip space sets the bar for others. It's also the largest semiconductor innovator in the United States.
Artificial intelligence stocks are rarer than you might think
Despite the emergence of AI in the business world, there are hardly any AI stocks in the public markets. But this may change in the near future, as more and more tech companies are gravitating towards this technology.
The artificial intelligence stock market is a thriving industry with potential for great returns. You need to decide what your investment goals are before you start buying stocks. If you are looking for an opportunity to make a lot of money, then you should consider buying these stocks.
AI stocks are great for investors who have short-term goals and are looking to get in on the action. But before you invest, you must be sure that you are in a competitive market and that you are comfortable with the risks.
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Nvidia has been a popular option for investors to access AI for a while. Its AIpowered chips are powering autonomous vehicles and high-performance gaming. It has a partnership with Sony, which allows it to offer software and hardware for cloud computing. Nvidia also has a car that it unveiled at the Consumer Electronics Show in Las Vegas.
Olga Steiner
https://financeworld.io/!!!Trading Signals And Hedge Fund Asset Management Expert!!! --- Olga is an expert in the financial market, the stock market, and she also advises businessmen on all financial issues.