NVIDIA Faces Bearish Trends Despite Long-Term Growth Potential; Analysts Suggest 'Hold'

Technical Analysis

NVIDIA Corporation (NASDAQ: NVDA) closed at $137.34 on December 12, 2024, experiencing a decline of 1.41%. Recent price movement shows support at $131.60 and resistance at $139.56, indicating a narrowing trading range. The Relative Strength Index (RSI) of 38 suggests that the stock is approaching oversold territory, which could precede a corrective bounce. However, the Moving Average Convergence Divergence (MACD) at -1.62 is bearish, supporting the downward trend.

The current price is below the 50-Day Moving Average of $138.95 but remains above the 200-Day Moving Average of $114.70, showcasing an overarching bullish trend despite short-term bearishness. Notably, the high trading volume of 151.03 million, though below the average of 237.93 million, implies active market participation even amidst uncertainties.

Fundamental Analysis

NVIDIA's market capitalization is a robust $3.36 trillion, positioning it as a significant player in the semiconductor industry. With a PE ratio of 54.07, the company is valued as a high-growth entity, albeit above its intrinsic value, signaled by the discounted cash flow (DCF) estimate of $59.36. The low dividend yield of 0.01% underscores its focus on reinvesting in growth areas rather than returning cash to shareholders.

The EPS (TTM) at $2.54 presents earnings growth potential aligned with NVIDIA’s industry leadership in AI and computing. The upcoming earnings announcement on February 19, 2025, will be pivotal in assessing NVIDIA’s operational performance and outlook in a competitive ecosystem highlighted by new AI market entrants and speculations of reduced dominance.

News Impact

Recent news clarified that NVIDIA dismisses rumors regarding a supply cut to China. This affirmation supports the company's expansion strategy in global markets, emphasizing commitment amidst geopolitical pressures. Concurrently, discussions around competition in the AI space and the potential shifts in market leadership by 2028 reflect broader industry trends NVIDIA must navigate.

Stock Performance Prediction

For the next trading day (December 13, 2024), expect slight fluctuations within the established support and resistance levels, driven by investor reactions to recent market rumors and technical indicators. Over the upcoming week, if RSI trends upwards, a gradual price recovery could occur, leading towards the resistance level of $139.56.

Intrinsic Value and Long-term Investment Potential

Although NVIDIA's current price exceeds its DCF-derived intrinsic value, the high analyst consensus target median of $175 reflects market optimism driven by NVIDIA's long-term growth catalysts in AI and computing. However, the elevated PE ratio suggests potential overvaluation in the short term unless significant earnings growth justifies the price.

Overall Evaluation: Hold

Given the near-term bearish indicators balanced by robust long-term growth potential and industry footprint, NVIDIA is assessed as a 'Hold'. The current price overvaluation needs to align with earnings improvements, and vigilant monitoring of competitive pressures in the AI market is essential for evaluating future growth trajectories.