- Nvidia climbed 7.1% on Monday as NASDAQ gained 1%.
- UBS raised its price target on NVDA to $540 early Tuesday.
- July US Retail Sales strongly surpassed consensus.
- NVDA stock is about 9% off its all-time high from July 14.
Nvidia (NVDA) stock is running against the market’s trend on Tuesday after UBS raised its price target on the leading maker of computer chips for the artificial intelligence industry. The stock rose more than 7% on Monday and tacked on 2% in Tuesday’s premarket.
July US Retail Sales failed to lift US equities despite a noticeable beat. Released one hour before the opening bell on Tuesday, the data revealed a 0.7% MoM growth rate in July. The consensus forecast had been 0.4%, already an improvement over June’s 0.2%.
The market is selling off on Tuesday as US Treasury yields continue their march higher. Dow Jones, S&P 500 and NASDAQ 100 futures are all between 0.5% and 0.75% lower in the premarket as growth stocks continue to outperform large-cap value stocks.
Nvidia stock news: UBS raises price target to $540
UBS analyst Timothy Arcuri wrote in a client note on Monday that investors should “stay the course” with Nvidia ahead of Q2 earnings that arrive on August 23, next Wednesday.
Arcuri raised his NVDA price target from $475 to $540, saying that short-term supply constraints on Nvidia’s H100 and A100 GPUs should lead to better profitability. Recent news emerged that Saudi Arabia and the United Arab Emirates are both stockpiling thousands of the expensive chips for their own generative AI plans.
Arcuri suggested that Nvidia will raise its outlook on the August 23 earnings call, and he now posits Nvidia CEO Jensen Huang will guide for $14.5 billion in third-quarter revenues following the last earnings call’s hefty raise to $11 billion in Q2 sales.
The UBS analyst says to expect $10 in earnings per share (EPS) for Nvidia this year and $17 for next year. This would mean that Nvidia is only trading for less than 26 times next year’s earnings, which would make it much cheaper than it currently looks.
Wall Street consensus for the second quarter is $11.06 billion in revenue on $2.08 in EPS.
Nvidia FAQs
Nvidia is the leading fabless designer of graphics processing units or GPUs. These sophisticated devices allow computers to better process graphics for display interfaces by accelerating computer memory and RAM. This is especially true in the world of video games, where Nvidia graphics cards became a mainstay of the industry. Additionally, Nvidia is well-known as the creator of its CUDA API that allows developers to create software for a number of industries using its parallel computing platform. Nvidia chips are leading products in the data center, supercomputing and artificial intelligence industries. The company is also viewed as one of the inventors of the system-on-a-chip design.
Current CEO Jensen Huang founded Nvidia with Chris Malachowsky and Curtis Priem in 1993. All three founders were semiconductor engineers, who had previously worked at AMD, Sun Microsystems, IBM and Hewlett-Packard. The team set out to build more proficient GPUs than currently existed in the market and largely succeeded by late 1990s. The company was founded with $40,000 but secured $20 million in funding from Sequoia Capital venture fund early on. Nvidia went public in 1999 under the ticker NVDA. Nvidia became a leading designer of chips to the data center, PC, automotive and mobile markets through its close relationship with Taiwan Semiconductor.
In 2022, Nvidia released its ninth-generation data center GPU called the H100. This GPU is specifically designed with the needs of artificial intelligence applications in mind. For instance, OpenAI’s ChatGPT and GPT-4 large language models (LLMs) rely on the H100’s high efficiency in parallel processing to execute a high number of commands quickly. The chip is said to speed up networks by six times Nvidia’s previous A100 chip and is based on the new Hopper architecture. The H100 chip contains 80 billion transistors. Nvidia’s market cap reached $1 trillion in May 2023 largely on the promise of its H100 chip becoming the “picks and shovels” of the coming AI revolution.
Long-time CEO Jense Huang has a cult following in Silicon Valley and on Wall Street due to his strict loyalty and determination to build Nvidia into one of the world’s leading companies. Nvidia neary fell apart on several occasions, but each time Huang bet everything on a new technology that turned out to be the ticket to the company’s success. Huang is seen as a visionary in Silicon Valley, and his company is at the forefront of most major breakthroughs in computer processing. Huang is known for his enthusiastic keynote addresses at annual Nvidia GTC conferences, as well as his love of black leather jackets and Denny’s, the fast food chain where the company was founded.
Nvidia stock forecast
Nvidia’s major turnaround on Monday thrust the share price back up to the 9-day Simple Moving Average, which just crossed below its 21-day SMA counterpart in the previous week. The premarket price is also close to retesting the 21-day SMA. A break above here in the regular session will signify that the rally is back on.
The overall market has been trending lower in August, but expect NVDA price to rise as the August 23 earnings date nears. Traders will want to be positioned well in case another gap up occurs like it did at the Q1 earnings call three months ago.
The Moving Average Convergence Divergence (MACD) has turned bearish, but expect this indicator to also flip positive ahead of next Wednesday.
NVDA daily chart
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