Nvda stock- Nvidia hits pivotal point: should you consider buying?

Nvda stock- On Wednesday, Nvidia (NVDA) stock approached its 50-day moving average, a critical technical indicator. The day before, the stock had risen to surpass the 21-day exponential moving average following news that Huawei Technologies, a China-based company, is testing an advanced AI chip comparable to Nvidia’s H100. This development highlights the competitive landscape and the pressures Nvidia faces from international competition.

Nvidia’s export of its advanced data center chip to China is currently constrained by U.S. sanctions. Huawei’s new chip, the 910C, could also be impacted by further sanctions, potentially affecting its market positioning and Nvidia’s competitive edge.

The stock recently rebounded from the psychologically significant $100 level, which could attract investors back into the market. However, decisions should be based on more than just emotional reactions. It’s crucial to analyze various technical indicators and chart patterns to gauge whether Nvidia stock represents a viable investment opportunity right now.

Adding another layer of complexity, Huawei Technologies, a major Chinese technology player, is developing its own advanced AI chip, the 910C. This new chip could also face restrictions if further U.S. sanctions are imposed. Such sanctions could hinder Huawei’s ability to compete with Nvidia in the AI chip sector, but they could also inadvertently shape the competitive dynamics in the industry. The interplay between these sanctions and market competition could influence Nvidia’s market position and its strategic responses to international trade policies.

Recently, Nvidia’s stock has made a notable rebound from the psychologically important $100 level, a price point that often serves as a psychological benchmark for investors. This rebound could potentially attract investors who view the stock’s return to this level as a buying opportunity. However, while this rebound might spark initial enthusiasm, it’s essential for investors to rely on more than just emotional reactions when making investment decisions.

Nvidia’s Earnings and Market Performance

In 2023, Nvidia saw a remarkable 239% surge in stock price, underscoring the impact of strong earnings on stock performance. Despite a recent dip in July and August, the stock has still gained over 100% year-to-date. Earnings are a critical component of investing, but they are just one aspect of a comprehensive evaluation. The other pillars include technical strength, market direction, and effective risk management.

As Nvidia prepares for its second-quarter report later this month, the stock’s recent performance presents both positives and negatives. Last Monday, the stock dropped by 6.4% following reports of a delay in the next-generation AI chip due to a design flaw. Bernstein analyst Stacy Rasgon noted that this delay is unlikely to significantly impact Nvidia’s market share. On the demand side, major hyperscalers are increasing their capital expenditure plans, which should bolster the need for Nvidia’s AI chips.

Market Volatility and Risk Management

Recent market volatility has highlighted the importance of risk management in stock investing. Nvidia experienced a 29% decline in stock value over a four-week period, reflecting both broader market trends and specific company challenges. In early August, shares fell following reports of a Department of Justice investigation into Nvidia’s acquisition of the AI startup Run.ai and scrutiny over its practices in selling AI chips to cloud providers.

Currently, Nvidia is trading about 3% below its 50-day moving average, a sign that investors should tread carefully. Despite these setbacks, the company’s future prospects remain promising.

Growing Demand for AI Chips

On a positive note, Meta Platforms (META) has bolstered Nvidia’s outlook with its substantial AI spending plans. Meta, a major customer of Nvidia’s AI chips, intends to install 350,000 Nvidia H100 graphics cards by the end of the year. This demand for AI technology provides a significant boost to Nvidia’s market position.

Furthermore, Nvidia announced plans in June to launch its most advanced AI platform by 2026 and to use next-generation memory to enhance processing speeds. In addition, Foxconn’s plan to build an advanced computing center in Taiwan with Nvidia’s Blackwell chips and the expansion into autonomous driving and electric vehicles indicate growing strategic partnerships and market opportunities. Although Tesla currently uses Nvidia chips, it plans to develop custom solutions in-house in the future.