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Investors across the stock market are keenly anticipating the earnings of chip maker Nvidia.
Dream time
Strongly expected
nvidia
Earnings due late Wednesday are dominating investor interest — and for good reason. With expectations rising, one analyst says the stock has shown downside weakness with implications for the broader market.
Nvidia (stock symbol: NVDA) will announce its results after the bell has rung, and the bullish trend for stocks on Wall Street has reached its peak in recent days. Analysts widely expect another strong quarter and a solid outlook from the chipmaker, whose stock price has risen more than 210% so far this year, adding more prosperity to the market.
Standard & Poor’s 500
And
Nasdaq.
The fundamentals look good for Nvidia, whose chips are seen as key to growth in the artificial intelligence industry. One of the prevailing market trends in 2023 has been investor craze over AI, which has fueled Nvidia’s recovery, and there are signs that the bubble surrounding the high-growth technology could grow even larger.
Nvidia’s latest results, released in May, were impressive, proving that the AI was much greater than many investors thought, driving nearly a third gains in the share price in subsequent days and sending positive ripples through the market.
“Therefore, the performance of Nvidia’s share price after it announced its financial earnings for the second quarter… will likely again play a major determinant in the performance of the Nasdaq 100 leading index in the remaining months of 2023 which will likely have a knock-on effect throughout.” .” “In the global equities space as well,” analyst Kelvin Wong of brokerage OANDA wrote in a note Wednesday.
The main concern for investors is that expectations may be too high. Nvidia needs to beat expectations – perhaps significantly exceed them – to keep the momentum behind the stock, which is trading at a valuation of 237 times last year’s earnings. The upside is that the AI growth outlook could be so good that it warrants a fundamental revision of the valuation based on future earnings projections.
However, Wong noted, “Nvidia now faces a higher bar to weathering such an overly optimistic forecast than it did before during its previous earnings release in May 2023.” “Any slight disappointment in the second-quarter earnings numbers and/or direction of expectations is likely to create a significant negative feedback loop in Nvidia’s share price that could jeopardize the current bullish trend of the Nasdaq 100.”
There is one more thing for investors to worry about: the outlook for a stock is based on technical analysis, which relies on market data and price trends rather than external fundamentals. And it doesn’t look great.
“In a technical analysis lens, Nvidia’s current price action has shown bullish exhaustion conditions that indicate an increased risk of a multi-week bearish reversal,” Wong said.
In particular, Wong highlights how on Tuesday the stock soared to a record intraday high of $481.87, but failed to sustain that bullish momentum. Wong said the shares finally closed below the key resistance level of $474.10, forming a downtrend with the highest volume in over a month. Wong added that an important medium-term support level to watch is $405.95, with Nvidia stock heading towards opening at $460 based on pre-market trading in the US.
While animal spirits will likely rule the moves in Nvidia stock after earnings, it’s still worth considering the technical picture.
Write to Jack Denton at [email protected]
(tags for translation) Computers/Consumer Electronics
