• NVIDIA’s business results were better than expected recently
• Analysts see companies as profiting from the AI hype
• From a technical point of view, NVIDIA shares can still rise
NVIDIA stock fell sharply in 2022 against the backdrop of rising key interest rates, and the balance sheet for the fourth quarter of fiscal 2023, which ended on January 31, 2023 at NVIDIA, also showed significant declines in some business areas. For example, sales of graphics cards fell 46 percent in the fourth quarter on the back of a shrinking PC market and reduced interest in cryptocurrencies. Sales and profits also shrank in the last quarter, but still exceeded experts’ expectations. This was mainly due to the data center business, which grew by eleven percent year-on-year to $3.62 billion. The US company benefited from the fact that its technologies and chips are well suited for AI-based applications, which are currently in great demand. NVIDIA also surprised positively with its sales forecast of 6.5 billion US dollars for the current quarter.
It is therefore already becoming apparent that artificial intelligence is likely to become an important business area for NVIDIA. This is because NVIDIA graphics processors act as accelerators for central processing units or CPUs. According to expert estimates, for example, around 30,000 graphics processors are used on Microsoft’s Azure servers for the hyped chatbot ChatGPT. Correspondingly, in March NVIDIA already presented several initiatives aimed at this market segment. The NeMo service, for example, is intended to function as a cloud service with which extensive language models can be trained, modified and used. With Picasso, the group is also launching a cloud-based tool that can be used to create image, video and 3D applications based on AI. NVIDIA sometimes works with partners.
Analysts mostly with buy recommendations for NVIDIA shares – but average price target offers little upside potential
Numerous analysts also believe that NVIDIA is one of the stocks that will be driven by the increasing spread of AI solutions in the future – even though the paper has already posted a strong price increase of a good 96 percent since the beginning of the year and most recently 286.80 US dollars (as of May 7, 2023 closing price). Evercore analysts say NVIDIA stock is a “top pick” according to “Investor’s Business Daily,” and experts at Rosenblatt Securities also named the share as one of seven stocks likely to benefit from increased AI-related spending, according to the news site .
Analyst Harsh Kumar from Piper Sandler also recently explained why he sees NVIDIA as one of the winners in the AI space: In his estimation, the majority of calculations in the AI space should run on NVIDIA chips. “From our point of view […] NVIDIA is the clear early leader in Generative AI, as we estimate that 80 percent of all AI workloads are currently running on NVDA chips,” Kumar said “It makes sense if other vendors offer 3-5x better performance. Looking ahead, NVIDIA has an opportunity to further expand that share with its software solutions that increase the value proposition for AI customers,” wrote the Piper Sandler -Expert.
Out of 38 analysts tracked on “TipRanks”, 30 recommend buying NVIDIA shares, and seven others say “hold”. Only one expert advises selling the title. However, the average price target is only $286.94, just 0.05 percent above the last closing price (as of May 7, 2023 closing price). However, the most optimistic analysts believe that NVIDIA’s shares could go as high as $355.00. Piper Sandler expert Kumar’s target price of $320.00 is also above average.
Incidentally, according to “Investor’s Business Daily”, analysts still expect weak business development for the first quarter of the 2024 financial year, the results of which NVIDIA will present on May 24, but after that the upswing should start. It is quite possible that one or the other price target will then be corrected upwards.
Technical analysis sees potential for further price increases
From a technical standpoint, NVIDIA stock broke out of a five-week range on May 1st. As “Investor’s Business Daily” writes, it is now “in the right buying range”, which goes up to $ 295.26. This can be used to increase an existing position or build a small position. However, due to the current macroeconomic uncertainties and the risk of a global recession, investors should exercise caution, according to the website.
“Trading-Treff.de” also certifies that the NVIDIA share still has upward potential from a technical point of view and names the sales area at 310.00 US dollars as the first interim target. boerse.de also sees the shares of the graphics card manufacturer “currently in short-term, medium-term and long-term upward trends”, but points out that these are not yet very clear, since the price is not far above the 20-day GD is trading at $246.81, which was only crossed at the end of April. “stockstreet.de” meanwhile warns of the resistance at 289.46 US dollars – the area of the high of March 2022. In fact, the NVIDIA share rose to its highest level in more than twelve months at the beginning of May, but from the mentioned resistance bounced back down. “stockstreet.de” speaks of an “overbought market situation” after the recent surge, which put the price under pressure again after May 1st.
In summary, however, according to Investor’s Business Daily, NVIDIA stock has “a near-perfect IBD Composite Rating of 98.” That means the stock outperformed 98 percent of all other stocks in the news site’s database on combined technical and fundamental metrics. Since the US company is also expanding into growth areas such as data centers including AI, self-driving e-cars and cloud gaming and could also benefit from the introduction of the Metaverse, the news portal still considers the stock to be a buy despite the already strong performance in 2023.
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