NVIDIA Stock Surges 3.97% Amid Bullish Indicators; Caution Advised for Short-Term Investors

Technical Analysis

NVIDIA Corporation (NVDA) closed at $120.87 with a notable increase of 3.97% on September 24, 2024. The recent surge in share price above the critical $120 resistance level indicates bullish momentum. The stock's Relative Strength Index (RSI) stands at 69, suggesting that NVDA is nearing overbought conditions, which may temper short-term gains. The 50-day moving average at $115.93 provides a support level that confirms a recent upward trend, while the 200-day moving average sits at $92.81, indicating a long-term bullish outlook. Key support is at $109.21, while resistance has formed at $123.54.

The Moving Average Convergence Divergence (MACD) indicates a bearish divergence in the three-month horizon, currently at -4.76, warranting caution for potential pullbacks in the upcoming sessions. ATR (Average True Range) is in line with moderate market volatility at $4.60.

Fundamental Analysis

NVIDIA's market capitalization stands at approximately $2.96 trillion, positioning it among tech giants. The PE ratio of 56.75 reflects a premium valuation, indicative of strong growth expectations, especially in the AI and graphics processing sectors. With recent EPS reported at $2.13, the market anticipates robust earnings growth ahead, underscored by an earnings announcement scheduled for November 19, 2024.

Despite some concerns regarding share liquidations by CEO Jensen Huang, the overall sentiment remains positive, supported by increasing demand in AI technologies. The company's intrinsic value calculated through discounted cash flow (DCF) methods is approximately $64.47, highlighting a potential overvaluation at current levels.

Short-term Projections

For September 25, 2024, NVDA's stock is expected to continue its momentum with the potential to test the upper resistance level of $123.54. However, given its current RSI and the presence of recent news suggesting market saturation in AI trades, a consolidation or minor pullback could occur if selling pressure emerges, particularly related to the CEO's share disposals.

For the upcoming week, NVDA may oscillate within the $115 to $125 range as traders assess market conditions post a strong upward movement. A breach of the resistance could pave the way for a more aggressive rally towards the consensus target median of $127.50.

Intrinsic Value and Long-term Perspective

NVIDIA’s long-term investment potential remains strong, supported by its leadership in AI and graphics processing. However, the current valuation metrics suggest that the stock may be overbought in the short term. Investors need to consider both the technological and competitive landscape that could affect future earnings.

Given the current DCF analysis, while the company exhibits substantial growth potential, its market price reflects high optimism that may not be justified in the near term.

Overall Evaluation

Considering all factors, NVDA's stock should be categorized as a "Hold" candidate. The recent surge and positive momentum reflect strong fundamentals, yet caution is advised due to potential overvaluation and market volatility indicated by technical signals. Investors are encouraged to monitor the stock closely, especially during the upcoming earnings announcement, which may significantly impact its outlook. The balance of excitement in AI trades and inherent risks suggests that, while NVDA is positioned for future gains, short-term fluctuations require prudent evaluation.