Nvidia Corporation (NASDAQ: NVDA) has truly outshone the global stock scene this year, experiencing an impressive 242% surge year-to-date. This exceptional performance is credited to its pivotal role in the widespread adoption of artificial intelligence on a global scale. The anticipation surrounding its third-quarter earnings report was met with resounding success, as the company not only met but exceeded expectations by a considerable margin. The financials revealed a staggering $18.12 billion in revenue for the third quarter, a remarkable 205% increase from the previous year’s comparable figure. Particularly noteworthy is the data centre revenue, soaring to unprecedented heights at $14.51 billion, reflecting a substantial 278.7% surge from the year-ago period. Even Elon Musk summed these numbers up in a single word: ‘Wow’.
Despite this stellar achievement, the pre-market performance of the stock shows a modest 1% dip, attributed to the cautious outlook on Chinese sales. The impact stems from new US export restrictions on semiconductors destined for AI applications in China, anticipating a significant decline in sales to the region. Approximately 20%-25% of the current data centre revenues are at risk due to this development, posing the most significant challenge to Nvidia’s operations.
However, amidst this challenge, analysts maintain a positive outlook, expecting Nvidia to retain over 85% of the market share for generative AI chips in the coming year. This underscores the company’s dominant competitive position. Moreover, optimistic growth forecasts for other regions keep the growth narrative intact, with fourth-quarter revenue projections reaching $20 billion, surpassing market expectations. The journey ahead for Nvidia remains compelling, navigating challenges while sustaining its momentum in the dynamic landscape of artificial intelligence.
Technical
On the 1D chart, a descending triangle formed but failed to boost the bears as a breakout emerged from the dynamic resistance. The 25-SMA (green line) has crossed above the longer-term 50-SMA (blue line) and 100-SMA (orange line) as buyers took control of the price in recent weeks. However, the psychological resistance at $505.01 has once again halted the pressure, with the pre-market contraction potentially triggering some profit-taking behaviour close to its all-time high.
If the price continues downward on the market open, it could look toward support at $476.28 as a potential pivot point. However, with the RSI indicating overbought conditions, a longer-term pullback is possible, which could bring lower support at $463.54 into play before the price can retest the breakout level of the triangle at the Fibonacci midpoint of $449.05, where support from the multiple-SMAs could hold some buyers.
However, if the pre-market gap fails to sustain and closes in the Wednesday session, there is a possibility of a retest at the $505.01 resistance. A high volume breakout could result in the price reaching a new all-time high and continue its impressive trajectory.
Summary
Nvidia has once again proven its dominance in the AI market, with record-breaking revenues in its latest quarterly report. However, the market recognizes some risk in its Chinese region, which triggered some profit-taking to send its price tumbling pre-market. Should the bearish movement continue on the market open, support at $476.28 could come into play. Alternatively, a closing of the gap could result in a retest at $505.01 as the stock attempts to continue reaching new heights.
Sources: Koyfin, Tradingview, Reuters, Nvidia Corporation.
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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