NVIDIA Shares Surge Amid Strong AI Demand, Caution Advised Due to Potential Overvaluation

Technical Analysis

NVIDIA Corporation (NVDA) closed at $116.91 on September 11, 2024, experiencing an increase of 8.15%. The stock has notable support at $109.21 and resistance at $123.54. Currently, the RSI at 40 suggests the stock is nearing oversold territory, despite the recent price action. The 50-day moving average stands at $117.95, indicating that NVDA is trading just below this key level, while the 200-day moving average at $89.69 shows a long-term bullish trend. With a Market Capitalization of $2.87 trillion and a high trading volume of 431.40 million, NVDA remains liquid, although they recently broke past its previous daily resistance, suggesting potential for further upward movement.

The MACD remains bullish at 4.54, indicating momentum is building in favor of buyers. With the ATR at 5.75, NVDA is experiencing higher volatility, which could be indicative of continued swings that traders should monitor closely.

Fundamental Analysis

NVIDIA’s underlying fundamentals are strengthening, supported by an EPS of 2.13 and a PE ratio of 54.89. Analysts are generally optimistic, with a majority rating the stock as a "Buy," driven by the company's robust position in AI technology demand and upcoming AI infrastructure investments. Notably, the news about potential restrictions being reviewed for exports to Saudi Arabia could open new revenue avenues.

Given that inflation is easing, which could lead to lower interest rates, this environment is favorable for technology stocks, including NVIDIA. Such factors point toward solid growth potential looking forward, aligning with the intrinsic value estimated by DCF at $65.30, significantly below the current trading price, suggesting the stock might be overvalued in the short term.

Predictions for Next Trading Day and Upcoming Week

For September 12, 2024, NVDA is expected to continue its upward momentum due to positive sentiment and the news from September 11 regarding AI demand. Furthermore, with recent investor enthusiasm, a close testing the resistance level of $123.54 is plausible.

In the upcoming week, NVDA could experience fluctuations as it approaches earnings season on November 19, which typically generates volatility. If market sentiment remains strong, NVDA may attempt to break through the $123.54 resistance.

Intrinsic Value and Long-Term Investment Potential

While the current trading price exceeds the DCF-derived intrinsic value, the company's innovations in AI place it in a strategic growth position. Long-term potential remains robust, considering NVIDIA's critical role in AI growth and demand for advanced processing technologies. Therefore, while immediate gains may face pullbacks due to valuation concerns, NVDA could outperform in the long run, should it maintain its market share and expand into new markets.

Overall Evaluation

NVIDIA Corporation is categorized as a 'Hold' candidate. The strong recent performance and optimistic demand outlook suggest potential for upside. However, the current valuation level in terms of PE ratio and DCF points to overvaluation, suggesting caution for new positions. Investors should monitor the stock closely for potential entry points following any corrections and capitalize on the long-term growth trajectory associated with ongoing advancements in AI technology.