Could Nvidia's shares experience further growth?
Hype Around Tech Stocks, Especially Nvidia, Is Back
In the tech world, Nvidia is once again the talk of the town. An analyst has raised the bar with a significant increase in the price target for Nvidia, signaling a potential buy. Here are the essential chart levels to keep an eye on.
The tech industry faces a whirlwind of challenges from all corners. From high inflation, slow global growth, and the ongoing war in Ukraine to the intensifying US-China tension, there's no shortage of obstacles.
From Chip Shortage to Oversupply?
The COVID-19 pandemic initially sparked a surge in chip demand in 2020, causing a chip shortage in the succeeding years. However, some industry experts now predict a major shift—the chip shortage could transform into an oversupply problem by the end of 2023, according to Investors.com.
The World Semiconductor Trade Statistics has just forecasted that chip sales might decrease by 4.1 percent in 2023. In contrast, chip sales grew by 26.2 percent in 2021 and 4.4 percent in 2022.
The potentially challenging times for Nvidia, a leading data center and gaming industry supplier, could continue in 2023.
A Disappointing Third Quarter
In November 2022, Nvidia belowed Wall Street's earnings target for the third quarter. Despite higher-than-expected revenues, the company earned 58 cents per share in its Q3, marking a 50 percent decline compared to the previous year. Revenue decreased by 17 percent, landing at $5.93 billion.
Nvidia is scheduled to report its fourth-quarter results on February 22. Analysts polled by FactSet predict a 39 percent drop in Nvidia's earnings for the quarter and a 26 percent decline for the full year, with essentially static revenues.
Promising Earnings Growth Ahead
For the forthcoming fiscal year 2023/24, which begins on February 1, Wall Street anticipates that Nvidia's earnings could recover by nearly 33 percent per share, although they will still be slightly below the 2022 fiscal year peak.
Amid optimistic predictions, Nvidia's stock has seen a significant upward push in recent weeks. Since reaching a multi-year low of $110 in October, the stock has surged by around three-quarters (as shown in the chart). On Monday, it was one of the top performers in the Nasdaq 100 Index, rising 7.6 percent to $191.93. The Nvidia stock was trading at €175.60 in German trading on Tuesday morning.
The stock has already increased by 26 percent in 2023 and is among the top performers in the Nasdaq 100. It has broken above both the 50-day and 200-day lines. On Monday, the stock also surged past the December interim high, another buy signal.
Potential Obstacles:
The stock is now approaching the chart resistance at $192, where it has previously failed multiple times. A sustained break above this zone could propel the Nvidia stock above the $200 mark from a chart perspective. The next resistance would then be the zone at $207, where the stock encountered resistance in February and March 2022.
The relative strength for the Nvidia stock is currently robust, with it at a high since the consolidation. Moreover, the 50-day line is about to cross above the 200-day moving average, a sign of further price rises in the medium term.
Expert Opinions on Nvidia:
Barclays, a prominent investment bank, is optimistic about the future of semiconductor manufacturers following a challenging phase marked by supply shortages. In a report released on Monday, analyst Blayne Curtis expressed particular optimism towards companies manufacturing microchips for data centers, PCs, or mobile devices. AI is also expected to play a significant role in the future, according to Curtis.
Specifically, for Nvidia, the expert remains optimistic, reflected in a significantly increased price target of $250 while maintaining an "overweight" rating. This suggests a potential upside of 30% from the current levels.
However, Barclays acknowledges challenges for the chip industry, such as new COVID-19 waves in China impacting consumption and limited access to funding from the US government's "Chips Act" funding program.
AI's Pivotal Role
A critical factor for Nvidia could be artificial intelligence. In collaboration with Microsoft, the company aims to further develop AI by utilizing Nvidia's expertise in GPUs, specialized chips for AI workloads. Additionally, Nvidia's chips contribute to Bitcoin mining and self-driving electric cars.
BOERSE ONLINE, too, is optimistic about the Nvidia stock in the medium term, primarily due to the AI story, and has set a price target of €245.
Interestingly, the world's top analyst warns of a crash but also sees a "great buying opportunity."
Conflict of Interest Disclosure: The CEO and majority shareholder of Boersenmedien AG, Mr. Bernd Foertsch, has acquired direct and indirect positions over the financial instruments mentioned in the publication or related derivatives, which may benefit from potential price developments resulting from the publication: Nvidia.
Enrichment Insights:- The semiconductor industry could face oversupply risks in 2023, but AI and EV chips are insulated due to ongoing demand growth.- Nvidia's focus on AI-specific accelerators helps it avoid broader oversupply risks while capitalizing on compute-intensive applications.- Semiconductor equipment sales grew in 2024, supporting investments in advanced nodes and packaging that benefit Nvidia's supply chain partners.- Nvidia's performance remains resilient, aligning with growth sectors and minimal reliance on commoditized chips affected by 2023's inventory glut.
- The semiconductor industry, including Nvidia, is predicted to see a significant shift by the end of 2023, moving from a chip shortage to an oversupply problem, according to Investors.com.
- Nvidia, a key player in the data center and gaming industry, might face challenging times in 2023 due to the potential semiconductor oversupply.
- Despite the projected challenges, Nvidia's stock has witnessed a noteworthy upward trend in recent weeks, with the possibility of breaching the $200 mark as it approaches the chart resistance at $192.
- The prominent investment bank, Barclays, remains optimistic about Nvidia, setting a price target of $250, indicating a potential upside of 30% from current levels.
- AI is expected to play a significant role in the future, particularly for Nvidia, especially in collaboration with Microsoft and its application in self-driving electric cars.
