Sign InNVIDIA Stock Outlook: Overbought Conditions Forecast Short-Term Consolidation Ahead of Earnings
Summary
On May 19, 2025, NVIDIA closed nearly unchanged as technical indicators suggest a potential pullback ahead of its earnings announcement on May 28, amidst strong growth prospects in the booming AI market.
Technical Analysis
NVIDIA (NVDA) closed virtually unchanged at $135.48 on May 19, 2025, after trading in a range of $132.41 to $135.87. The stock remains well above both its 50-day ($112.67) and 200-day ($125.49) moving averages, indicating sustained upward momentum. The Relative Strength Index (RSI) at 93 signals extreme overbought conditions, suggesting a potential short-term pullback or consolidation. The Moving Average Convergence Divergence (MACD) remains positive at 5.86, supporting continued bullish trends. Average trading volume sits significantly above the current daily volume (190.9 million vs. 288.2 million average), implying a slight cooling in buying interest. Key technical support lies near $120.15, while immediate resistance is encountered at $140.11. The average true range (ATR) of approximately $3.79 reflects moderate price volatility.
For the next trading day (May 20), the stock is likely to consolidate in a tight range due to overbought RSI and upcoming earnings announcement on May 28. Over the upcoming week, volatility may increase as market participants position ahead of earnings with potential retests of support around $131.90 (stop-loss level) or an attempt to challenge $140 resistance.
Fundamental Analysis
NVIDIA's market capitalization stands at $3.30 trillion, marking it as one of the largest technology companies globally. The trailing twelve months (TTM) earnings per share (EPS) of $2.94 and a price-to-earnings (P/E) ratio of 46.08 reflect strong growth expectations embedded in the price. The discounted cash flow (DCF) valuation at approximately $144.89 suggests the current price is slightly below intrinsic value, implying limited near-term upside from fundamental valuation alone.
Recent news highlights significant strategic initiatives, including Foxconn's AI data center collaboration capable of 100 MW power, underscoring NVIDIA’s leadership in AI infrastructure. At the 2025 Computex, NVIDIA unveiled advances in humanoid robotics and NVLink Fusion, signaling sustained innovation and ecosystem expansion, broadening its market moat. Partnerships with MediaTek and Marvell enhance its position in customizing AI chips, potentially augmenting future revenue streams. The AI market’s rapid growth, projected to reach trillions by decade-end, aligns with NVIDIA’s core competencies and long-term growth trajectory.
Notwithstanding, notable investor skepticism surfaced through Michael Burry’s recent sizeable put purchases, possibly reflecting concerns over short-term valuation excesses or near-term event risks. Moody’s recent US credit downgrade also injects macroeconomic uncertainty, which may indirectly pressure growth stocks like NVIDIA.
Intrinsic Value and Long-Term Potential
The DCF model values NVIDIA near $145, close to current pricing, indicating the stock is fairly valued intrinsically. However, given the company’s dominant positioning in AI semiconductors, continuous innovation, and expanding partnerships, NVIDIA's long-term growth potential remains robust. The underlying secular trends in AI, data center infrastructure, and robotics suggest earnings could accelerate beyond current estimates, warranting a premium valuation over time. Volatility around earnings and market cyclicality may produce intermittent price fluctuations, but fundamentals support a strong growth narrative over multiple years.
Performance Outlook
- Next Trading Day: Consolidation likely within $132 to $137 range; RSI overextension may pressure gains.
- Upcoming Week: Possible increased volatility ahead of May 28 earnings; price action may test $131.90 stop-loss or resistance near $140.
Overall Evaluation
NVIDIA presents a fundamentally solid, growth-oriented profile with significant exposure to an expanding AI market and ongoing technological innovation. The near-term technical indicators warn of an overbought condition that could induce a short-term pause or pullback. Intrinsic valuation aligns closely with the current stock price, limiting immediate upside absent a strong earnings beat or positive catalyst.
Given the balance of strong growth dynamics countered by stretched technical signals and valuation, the stock fits firmly into the Hold category at this juncture. Short-term traders should exercise caution due to overbought momentum and earnings volatility, whereas longer-term investors can view the underlying secular trends favorably for sustained value accumulation.
