NVIDIA Faces Bearish Trend Amid Price Decline, Yet AI Growth Potential Remains Strong

Technical Analysis

NVIDIA Corporation (NVDA) closed at $113.37 on September 18, 2024, reflecting a decline of $2.22 (-1.92%) from the previous day’s trading. Key technical indicators reveal a bearish trend, with an RSI of 38 indicating that NVDA is nearing oversold conditions. The stock has been trading below its 50-day moving average of $117.12 and its 200-day moving average of $91.42, suggesting a lack of bullish momentum.

Support is currently observed at $109.21, while resistance is identified at $123.54. The recent trading volume of 301.22 million is slightly below the average of 341.23 million, indicating a potential downturn in investor interest. The MACD reading of -2.46 further supports a bearish sentiment in the short-term.

Fundamental Analysis

From a fundamental perspective, NVIDIA is positioned in a rapidly growing sector, particularly in AI chips that are increasingly in demand among data centers. Despite recent price turbulence, NVIDIA maintains a robust market capitalization of $2.78 trillion. The company’s P/E ratio of 52.98 suggests that the stock is currently valued at a premium, reflective of strong growth expectations, although it may invite skepticism regarding future earnings performance given the decline in share price.

Analyst consensus remains bullish, with a majority categorizing NVIDIA as a "Buy", supported by positive sentiment regarding its competitive edge in AI. Despite the current market conditions, the target price consensus is $117.18, with a median target of $125.

The discounted cash flow (DCF) calculation suggests an intrinsic value of approximately $64.89, indicating that the stock may be overvalued at its current price. However, growth forecasts based on trends in AI and digital transformation remain vibrant, fostering long-term investment potential.

Predictions for the Next Trading Day and Upcoming Week

For the next trading day (September 19, 2024), NVDA may experience a volatile session influenced by external factors, including the recent Federal Reserve interest rate cut which is expected to improve market conditions for technology stocks. The price is likely to test the support level of $109.21. If sustained demand for NVIDIA's products prevails, there is potential for a rebound towards the resistance level of $123.54 over the coming week, particularly utilizing the bullish news flow surrounding AI and tech stocks.

Overall Evaluation

While NVIDIA's strong fundamentals and growth potential in AI technology remain intact, the immediate technical signals and market macroeconomic conditions suggest caution. Given the current price relative to its intrinsic value, as well as the potential volatility anticipated in the short-term, NVDA is classified as a "Hold" candidate. This classification allows investors to monitor developments and reassess if better entry points or long-term growth opportunities emerge in the future.