NVIDIA Stock Analysis: Support Holds as AI Demand Fuels Long-Term Buy Recommendations

Technical Analysis

NVIDIA Corporation (NVDA) closed at $122.59 on July 23, 2024, slipping 0.77% from the previous trading session. The stock trades near its recent support at $120.99, suggesting a potential rebound if this level holds. The 50-day moving average of $116.82 and a solid 200-day moving average of $77.55 indicate a long-term uptrend. The RSI of 50 reflects neutrality, pointing to possible sideways movement ahead. The MACD is slightly positive, suggesting momentum may build in the coming days. Key resistance is seen at $123.54, with a target median of $118 from analysts. Volume has been below average, indicating a lack of conviction in the recent price action following a dip.

Fundamental Analysis

NVIDIA boasts a market cap of approximately $3.02 trillion, underpinned by a robust earnings per share (EPS) of $1.71 and a high price-to-earnings (P/E) ratio of 71.69, indicative of growth expectations despite current valuation concerns. The discounted cash flow assessment suggests an intrinsic value of approximately $58.13, highlighting potential overvaluation at current prices. However, with continued AI-driven demand, and support from developments in sectors such as gaming and data centers, growth prospects remain strong. The bearish sentiment stemming from competition, notably from Tesla’s Dojo supercomputer project as emphasized by recent news, may pressure the stock short-term but signals a competitive landscape rather than systemic weaknesses in NVIDIA's core business.

Strong institutional support is reflected in current sentiment, with 41 'Buy' ratings against just 2 'Sell' ratings, emphasizing the bullish outlook amidst short-term volatility. However, upcoming earnings on August 28, 2024, will likely serve as a catalyst for price movement, with analysts predicting enthusiasm in AI markets continuing.

Predictions

For the next trading day, NVDA may experience muted trading around the $122 mark, with immediate focus on the support level of $120.99. The stock may oscillate within a range of $120.99–$124.69. Over the next week, if earnings sentiment remains positive and broader AI market trends hold, NVDA could push towards the $123-$125 range, barring negative competitive news.

Intrinsic Value and Long-Term Potential

Despite a higher intrinsic value derived from discounted cash flow analysis, the ongoing demand for NVIDIA's products in AI and gaming markets suggests long-term investment potential remains robust. As AI technologies advance and their applications proliferate, NVIDIA's innovative edge as a leader in this sector marks it as a potentially worthwhile long-term holding.

Overall Evaluation: Buy Candidate

NVIDIA's current market positioning, combined with its technological leadership and growth prospects in the AI sector, warrants classification as a 'Buy' candidate. Though the stock may face short-term volatility due to competitive pressures and valuations, its long-term growth trajectory appears solid, supported by both technical indicators and fundamental strength. Investors may find value in holding or accumulating NVDA, particularly as broader market sentiment on AI remains strong.