To The Moon

We saw $NVIDIA Corp(NVDA)$ stock rose again on Thursday closed with +1.92%, and it has continued the rise since 10 September 2024.

Nvidia has continues to benefit from investor enthusiasm about the company's strong position during the AI boom.

We have seen how Nvidia has suffered decline since the earnings growth but the earnings does highlight strong demand for AI chips and Nvidia's prime position as factors contributing to organic sales growth.

So far Nvidia's AI-fueled gain has sent it into the $3 trillion market capitalization club, an achievement only previously reached by $Microsoft(MSFT)$ and $Apple(AAPL)$ , in record time.

Now the question will be can Nvidia restart its AI-fueled surge again?

If we looked at other mega market cap stocks, such as Apple, Microsoft, and Amazon (AMZN), while these stocks suffered a contraction in price-to-earnings ratio, they "still outperformed the S&P by delivering strong EPS growth."

Organic Sales Growth Supports Outperformance

Nvidia has consistently blown away investors' expectations on revenue and earnings in recent quarters.

On 28 Aug when Nvidia announced its fiscal 2025 second quarter earnings, the second-quarter numbers came in better than analysts had anticipated on both the top and bottom lines, as did the company's revenue outlook for the current quarter.

But shares fell as the latest numbers indicate a slowdown in growth for the AI darling. But I believe that NVDA will continue to grow revenue (& EPS) organically faster than the S&P.

Demand For AI Chips Continues Growing

Surging demand for AI-related hardware could sustain Nvidia's performance.

The near-term upside potential given that "NVDA's supply chain is gearing up to deliver $150-200B of datacenter sales" in 2025. Amid the ongoing AI boom, Nvidia has been unable to keep up with surging demand for its data center products.

Why the Rumored Nvidia Blackwell GPU delay matters for data centers

Another component that could support growth is Nvidia's shift to offering "truly full stack solutions" rather than simply chips as they did in the past. This dynamic was a major factor in NVDA's revenue & EPS acceleration" over the last four quarters, and this trend should continue.

Nvidia's upcoming Blackwell platform offers full-stack solutions, supporting the data center needs required to train and run AI workloads. Blackwell is already in high demand and is expected to drive the chipmaker's growth.

Rumors began swirling earlier August 2024 that availability of Nvidia’s latest artificial intelligence chip Blackwell will be delayed by three months or more. Much noise was made about what this might mean for the artificial intelligence ambitions of major hyperscalers. 

But what would be the impact on data center operators?

Blackwell's launch date matters so much for data centers because the chip is expected to usher in broad adoption of direct-to-chip liquid cooling. But since the announcement of the Blackwell chip, customers (including hyperscale players) have “almost universally” revised their specifications to require data center vendors to be ready for liquid cooling systems in anticipation of Blackwell’s needs. That takes some preparation.

AI at the edge, where AI computing is done on-device rather than through a third-party server, could be "a relatively overlooked area of AI adoption." Nvidia's growth in the AI edge market could add another $100 billion market for the company.

Falling interest rates are good for Nvidia

Investors seemed unsure if the CPI report, which showed inflation rising just 2.5% year over year in August, was good news for stocks, but by the afternoon, the Nasdaq was soaring, paced by Nvidia.

The Federal Reserve is expected to cut interest rates next week, but investors are unsure if it will cut rates by 25 or 50 basis points. Ideally, interest rates will come down while the economy remains strong or even gets stronger. That would be the best scenario for Nvidia, as lower rates make growth stocks more valuable, and it should encourage borrowing for investment in artificial intelligence (AI) infrastructure, meaning spending on Nvidia components.

According to a report from Semafor, the federal government is considering permitting Nvidia to export advanced chips to Saudi Arabia, which it would use to train advanced AI models. While Saudi Arabia isn't a huge market, the loosening of export rules would benefit Nvidia and could lead to other markets opening up.

Technical - Multi-timeframe

As investors we would be more concerned on how Nvidia would move in short term for the restart of AI-fueled surge and the long term whether Nvidia can continue to hold the leadership in the AI chips space.

From the technical using multi-timeframe, we are seeing that Nvidia is trading above both the short term and long term moving averages, and the recent rise over the past 3 days have helped Nvidia to regain investors confidence.

So I am seeing that Nvidia is building an upward trend on the multi-timeframe but we should continue to watch the overall market performance especially before the FOMC meeting next Tuesday (17 Sep 2024).

Summary

From what we have gathered so far, with the recent rise, as investors continued to express optimism about Nvidia’s prospects in artificial intelligence.

August inflation was cooler than expected, setting up the Federal Reserve to cut rates next week. Nvidia should benefit from lower interest rates, as it will help its valuation and encourage economic growth and investment in AI infrastructure.

So I am looking at the price action for Nvidia over the next few trading session.

Appreciate if you could share your thoughts in the comment section whether you think Nvidia can restart its AI-fueled surge?.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.