NVDA : Sell off Cont'd or Recovery in progress?
Brief Overview
Predicting Nvidia’s performance is a lot harder than anticipated.
The king chipmaker has been a standout performer, dominating the artificial intelligence (AI) chip market.
YTD, it has soared +156.47%. Based on past 12 months’ performance, it has risen by +202.65%.
Earlier on, its stock price has pushed past the $1,000 per share level, making it challenging for small investors to buy without fractional shares.
To address this, Nvidia executed a 10-for-1 forward stock split, effectively lowering the price of each individual share.
On the run up to the split, the market was awashed with positive news that the leading AI chipmaker will continue to soar post split.
On Mon, 10 Jun 2024 - it traded based on the “new” stock split price of approx. $120 per share.
True to predictions, Nvidia did rise further.
Unfortunately the momentum did not persist. (see below)
10 June 2024 to Present.
Nvidia’s stock price when market closed on 07 June 2024 was $1,208.90 per share.
Post split, its starting stock price on 10 June 2024 was $120.37 per share.
It dipped marginally for the first 2 days.
By the time Wed, 12 Jun 2024 came around it recovered lost ground & trended higher.
It peaked on 18 Jun 2024 at $135.58 per share.
In a short span of 7 days, it gained +12.15% by 18 Jun 2024.
Thereafter it will downhill ride until 24 Jun 2024 when it bottomed at $118.11 per share; lower than split price.
It has since been bouncing within a tight price range thereafter.
Factors Affecting Price.
Where will Nvidia be heading as we head into second half of 2024, come Mon, 01 Jul 2024 ?
Below are several considerations.
(1) Market Behavior After Splits.
Historically, most stock splits have often been followed by continued upward movement.
The increased accessibility attracts new investors, potentially driving demand and supporting the stock price.
There is still hope for Nvidia then ?
(2) Nvidia’s Prospects.
Nvidia remains a leader in AI, and its upcoming major product launch (the Blackwell) adds to its growth potential.
The Blackwell is a graphics processing unit (GPU) microarchitecture and the successor to the highly demanded Hopper and Ada Lovelace microarchitectures.
Although slated for end 2024 delivery, there have been no further updates since the unveiling in March 2024.
And if this is not enough, CEO Jensen Huang already has a planned successor to The Blackwell. It is the Rubin.
(3) Competitors ?
Like any “free” market, competition is ever present.
Nvidia will be fending off challenges posed by other chipmakers.
Namely:
$AMD(AMD)$ . Nvidia's closest competitor in GPU market. Their recent advancements in AI chip technology, eg. their Instinct line, is direct & serious threat, in high-performance computing.
$Intel(INTC)$ . While not a direct challenger yet, as Intel is still lagging behind the group. However its best not to discount this former king chipmaker. With its Gaudi 2 & Gaudi 3 holding the fort, Intel’s next generation chip “Falcon Shores” has been slated for 2025 delivery. Let’s hope this will be the comeback kid’s challenge to Nvidia and level the playing field.
Huawei. To be able to take on sanction after sanction thrown at it by the US government, this Chinese company is a phenomenon in its own rights. Its own “Ascend series” of AI chips remains competitive, particularly in the Chinese market. I cannot wait for Huawei to build its own proprietary Extreme Ultraviolet lithography machine to generate 3nm or smaller chip. It will be the real game changer.
$Qualcomm(QCOM)$ . Qualcomm, a leader in mobile processors — their AI chip offerings have not reached the same performance level as Nvidia, in data center applications. But do not discount this company yet.
(4) US Economy.
On 27 Jun 2024, US Q1 2024 gross domestic product (GDP) final estimates was published.
It came in at 1.4%, a marginal +0.1% better than Wall Street’s forecast of 1.3%.
There is no room for rejoice because it is -2.0% lower than Q4 2023 GDP data.
This has generated much concerns after it was published.
Question on everyone’s mind is - “Is US economic growth drying up” ?
(5) US Inflation.
On 28 Jun 2024, US personal consumption expenditure (PCE) inflation data for May 2024 was released.
Core PCE annualized inflation came in at 2.6% that is inline with market consensus. It is -0.2% lower than April inflation.
This is “good” news for both US market and the Federal Reserves because the one interest cut in 2024 could take place sooner than later. (see below)
Looking at the latest CME Fedwatch tool, the “highest” probability of 1-interest cut could take place in September 2024. (see above)
Should inflation continues to cool further, the other additional “bonus” interest cut could happen in December 2024 as FOMC team meet for the last time in FY2024.
(6) Technical Analysis.
Initially I wanted to skip this assessment. However to have a “holistic” view of Nvidia, I relented.
Referring to Nvidia’s stock price movement at the start of the post (see above), if you look carefully - Nvidia’s Moving Average (ma) for 200-day & 50-day are included.
Nvidia current stock price is trending much higher than the 2 moving averages:
- 200-day ma is $71.35.
- 50-day ma is $104.62.
- 20-day ma is $ 123.54.
Is Nvidia’s overpriced ? Based off moving average, it looks like it is.
However if we look at Nvidia’s Relative Strength Index (RSI), it is only “58” that is not overbought.
Summary.
Taking all above factors into considerations, Nvidia’s prospect and current lead position is not being challenged in the short to medium term.
Its fundamentals are still strong.
As part of the US market, its stock price will be subjected to ground sentiments.
Having chalked so many peaks on the run up to its quarterly earnings and subsequent forward stock split - a pull back / consolidation is to be expected.
With Q2 2024 earning season starting again, Nvidia’s results will be just what it needs to showcase to win investors’ confidence once again.
In the meantime, mild fluctuations will be the order of the day.
Do you think Nvidia will stage a recovery on first week of July ?
Do you think Nvidia’s fundamentals are too strong for any real challengers in the medium term; hence its a sure-win?
If you find this post interesting, give it wings! ️ Repost and share the insights ?
Do consider “Follow me” and get firsthand read of my daily new post. Thank you.
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
Pls help to "Re-post". Tks! Rating is important (to me).
Would you consider "Follow me" and get first hand read of my Daily new posts? Thanks!). Tks!