Nvidia stock hit a key level on Tuesday.
Shares of the artificial intelligence chip leader broke out at the buy point of 140.76 in October and reached an all-time high of 152.89 before falling below the 50-day moving average on Dec. 10. Ideally, stocks rise after breaking out of bases. But the stock is back at the 50-day line. Does that mean Nvidia is a buy now?
Investors await two big events early next year: Chief Executive Jensen Huang's remarks at the annual CES conference that starts on Jan. 5. The conference is a major event for big tech.
Then in March, Nvidia may reveal its GB300 Blackwell AI server during its GTC Conference. The conference will run from March 17-21.
Shares gained nearly 4% on Friday after Morgan Stanley analyst Joseph Moore named Nvidia a "top 2025 pick" but trimmed his price target on the stock to 166 from 168.
The analyst does not expect delays in the Blackwell chip production. Moore said that while a slowdown in the older Hopper chip is expected, that would be welcome news as that will make more high-end memory chips available for its Blackwell line.
The analyst also noted that "based on conversations with customers," he anticipates the biggest users of application-specific integrated circuits, or ASIC, to shift back to graphic processing units, or GPUs.
While Nvidia's GPUs, can be used for several AI tasks, ASICs, that its rivals are focusing on are meant to fulfill a single purpose. Mizuho analyst Jordan Klein noted that while "custom silicon will quickly gain share each year from GPUs, GPUs will be dominant for training purposes."
Broadcom Results, Analyst Views On Rival Chips
On Dec. 12, shares fell after Broadcom's results showed strong demand for artificial intelligence processors. Earlier, Meta Platforms and Elon Musk had announced plans for building AI data centers, which also boosted demand outlook for Nvidia.
But Broadcom also competes with Nvidia in data center AI networking gear and indicated that two large customers were developing their own next-generation AI processors using Broadcom's chips. Broadcom is also designing an AI chip for Apple.
But shares rose on Thursday, a day after Fed Chair Jerome Powell signaled fewer rate cuts in 2025. With its strong profit margins, Nvidia is better positioned to weather higher rates, according to Kathleen Brooks, research director at brokerage firm XTB.
Also Thursday, the stock rose after Citi analyst Atif Malik noted that Nvidia held three aces: While ASICs were cheaper, "the biggest advantage for GPUs/Nvidia," was the ability to handle different workloads, its software known as CUDA, and high bandwidth memory.
"Our recent supply-chain discussions indicate Nvidia's CoWoS (chip on wafer on substrate) foundry capacity allocation is expected to grow to 60% in 2025 from 56% in 2024, pointing to continued GPU momentum in 2025," he noted.
CoWoS is a packaging technology in which Nvidia supplier Taiwan Semiconductor specializes. Nvidia purchases the lion's share of it.
Nvidia Stock On Watch For Three Reasons
Are These Magnificent Seven Stocks A Buy Now?
Alphabet | Amazon | Apple | Meta | Microsoft | Nvidia | Tesla
Shares extended losses after news that a key customer and Magnificent Seven leader Microsoft is not "chip supply constrained." In its Securities and Exchange Commission filing earlier this year, Nvidia had disclosed that one customer accounted for 13% of its fiscal first-quarter revenue. UBS analyst Timothy Arcuri believes that customer was Microsoft.
Customer risk may well be Nvidia's Achilles' heel and make it vulnerable to fluctuations in demand from its main clients.
Earlier, on Dec. 12, news that the Supreme Court had dismissed Nvidia's appeal in a securities fraud lawsuit from shareholders likely pressured the stock. The 2018 suit was triggered when Nvidia's revenue took a hit amid a crash in cryptocurrencies and sought to investigate how much of its sales depended on cryptocurrencies.
However, the main driver for Nvidia stock remains sales of its Blackwell chip and how quickly it can ramp up its production.
On Dec. 10, Taiwan Semi said that sales grew 34% annually in November but declined 12.2% from October. From January to November, sales grew 31.8% compared with the same period in 2023. That likely pressured Nvidia, which fell 2.7%.
Shares also fell 2.6% on Dec. 9 amid news that China's State Administration for Market Regulation is investigating whether Nvidia has violated its antimonopoly laws.
Investors are on a watch-and-wait mode for Nvidia trading for three reasons:
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Funds Are On Watch Mode
Funds have not been rushing in to buy the stock. Although the stock's price performance has beaten 95% of other stocks in Investor's Business Daily's database, the Accumulation/Distribution Rating, which measures price and volume action over the last 13 weeks, is D-.
Volume is running light. That can change quickly once big money starts flowing in.
However, the relative strength line, which compares the stock with the S&P 500 index, fell sharply after the stock hit its all-time high of 152.89 last week. The relative strength line compares the stock with the S&P 500. The line, plotted in blue in IBD Charts and IBD MarketSurge, shows that Nvidia has not been matching the index's gains recently.
It is best to wait for that line to pick up.
In early December, reports said the AI chip behemoth was in talks with Taiwan Semiconductor to start production of its Blackwell chip in Arizona. So far, TSMC has made Nvidia's most advanced chips in Taiwan. The plan could be a way to get around tariff risks from the Trump administration.
Earlier plans were to use the Arizona factory for less-advanced chips.
Melius Research analysts also raised their price target to 185 from 165 and maintained their buy rating.
Nvidia Rises After Salesforce Earnings
Shares rose after software leader and Dow Jones component Salesforce reported strong results.
Salesforce is in the limelight, with analysts watching how its investment in autonomous AI agents can pay back investors. Salesforce is developing a next generation of autonomous, goal-driven AI "agents." Customers have been reluctant to pay for the earlier chatbot interfaces, called copilots.
After the company's report, analysts noted that its artificial intelligence products were gaining traction.
However, earlier, shares came under pressure after President-elect Donald Trump said he plans big tariffs on goods from China, Mexico and Canada.
But Bernstein Research analyst Stacy Rasgon noted that "raw semiconductor" imports from these countries were tiny and would not hurt Nvidia. The analyst did say the tariff raises some concerns that there may be more broad-based action that could hurt the semiconductor industry and even leaders like Nvidia.
Mizuho analyst Jordan Klein noted that the "restrictions seem in line or less severe than anticipated." Piper Sandler analysts also stated that there were fewer entities on the restriction list than expected.
In November, analysts at Piper Sandler projected a 20% upside for the stock and raised their price target to 175 from 140. Nvidia is positioned to gain most from the increase in the total AI accelerator market, which Piper Sandler sees at $70 billion in 2025.
Stock Market Leader
For Nvidia, its earnings growth is its strong point.
The AI chip behemoth continues to be a stock market leader and has an ideal Earnings Per Share Rating of 99, while the stock also shows all-around strength with a Composite Rating of 98.
Nvidia stock is on the IBD Leaderboard. The model portfolio has a hedge on that position with the Granite 2x Short NVDA Daily exchange traded fund. It is also a top AI stock to watch.
According to FactSet data, Nvidia ranks first among S&P 500 companies for revenue and earnings growth estimates through 2026.
Analysts expect a compound annual growth rate of 5.7% in sales for the S&P 500 with 13.8% in earnings per share over two years. But they see Nvidia's two-year compound growth reaching 35.5% in sales and 35.1% in earnings per share.
Third-Quarter Results Beat Views
Third-quarter sales came in at $35.08 billion with earnings of 81 cents per share. Analysts polled by FactSet had estimates of 75 cents per share on sales of $33.17 billion. Sales also beat the AI chip leader's outlook of $32.5 billion for the quarter.
Sales nearly doubled from the prior year, when Nvidia reported $18.1 billion in revenue.
Earlier, chip lithography gear maker ASML maintained its 2030 sales target of $46.3 billion at the lower end. The announcement followed a warning on Oct. 15, when ASML anticipated slower demand in 2025. That sent Nvidia stock nearly 5% lower on the day.
ASML Chief Executive Christophe Fouquet said the company expected that it would be able "to scale (extreme ultraviolet lithography) technology into the next decade" and contribute to the artificial intelligence opportunity.
Analysts at Jefferies Group believed that the slowdown in chip demand appeared to be temporary. ASML's lithography machines are used by foundries that supply chips to Nvidia.
Nvidia replaced Intel in the Dow Jones Industrial Average in November. It is also the fourth Magnificent Seven stock to join the Dow Jones industrials. The others are Apple, Amazon.com and Microsoft.
Big Tech's Strong AI Spending
Recent news shows demand for Nvidia's AI chips remains high. The chief investment officer at UBS Global Wealth Management, Mark Haefele, noted that "Big Tech's combined capex (capital expenditure) spending of $218 billion this year and another $254 billion in 2025 bodes well for the AI investment thesis."
Meanwhile strong AI data center demand helped Vertiv, which provides products and services to build AI data centers, beat earnings estimates for its September quarter.
In October, Nvidia CEO Jensen Huang said that a design flaw in its next-gen Blackwell chip had been fixed.
Earlier, yields were low but AI-chip maker Taiwan Semiconductor helped "recover from that yield difficulty and resume the manufacturing of Blackwell at an incredible pace."
Nvidia stock cleared a trendline entry near 139.60 on Oct. 17 after Taiwan Semiconductor profits surged 54.2% year over year. Taiwan Semi is a big supplier of AI chips to Nvidia and Apple.
Nvidia Stock: A Must-Watch
Meanwhile, bullish trends for artificial intelligence make Nvidia a must watch. In September, consulting firm Bain said the total addressable market for AI hardware and software will grow 40% to 55% for at least the next three years.
Demand for Nvidia's next generation graphics processing unit, the GB200, is expected to reach 3 million in 2026 vs. 1.5 million for its H100 units in 2023.
Elsewhere, analysts at Bernstein said that after its phenomenal growth, sustainability is the main question Nvidia faces, but the "time to worry is clearly not now."
On Sept. 3, Nvidia fell sharply below the 50-day moving average and saw the largest one-day market cap ever loss in dollar terms for any U.S. company, according to Dow Jones Markets Data.
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AI Products Drive Growth
Nvidia's graphics processing units help accelerate computing in data centers and AI applications.
The company was a pioneer in graphics processors used in such industries as health care, automobiles and robotics.
In March 2023, generative AI took a leap forward with OpenAI's ChatGPT. According to Huang, Nvidia's AI-capable chips paved the way for the "iPhone moment of AI."
That helped Nvidia turn the tide on its results. It had reported three quarters of declining year-over-year sales and four quarters of tapering earnings in late 2022 and early 2023.
But then the company achieved record top- and bottom-line growth in the six most recent quarters.
Is Nvidia Stock A Buy?
Looking at chart signals and technical measures can help investors assess whether Nvidia stock is a buy now.
Nvidia has retaken the 50-day moving average. A rebound above the 50-day line in high volume would be helpful.
The relative strength line shows that the stock has not outperformed the S&P 500. It would be wise to wait to see if it improves before buying the stock.
The stock has to build a new base with a buy point before it becomes a buy again. For more risk-tolerant investors, an early entry when the stock rebounds from the 50-day moving average in higher volume is an option. Until that happens, Nvidia is not a buy.
