From the metaverse and AI-on-5G to smart cities, robotics, self-driving cars and more, Nvidia continues to propel advances in machine learning and artificial intelligence. These innovations and a beat-and-raise earnings report have launched NVDA stock into a buy zone and earned it a spot on IBD Leaderboard.
After getting slammed in last year's bear market, the semiconductor designer has jumped sharply off its October lows. And top fund manages have fueled that move.
In a sign of strong demand, Nvidia sports an A+ Accumulation/Distribution Rating and a 1.5 up/down volume ratio. Plus, 59 funds with an A+ rating from IBD own shares in NVDA stock.
Overall, the number of funds owning NVDA stock rose from 1,351 in March 2022 to 1,456 by the end of last year.
Nvidia's Composite Rating has rebounded to a 94, meaning it's now outpacing 94% of all stocks in terms key stock-picking traits.
Fellow leaders in the fabless semiconductor group include Inpinj, Rambus, Lattice Semiconductor and Mobileye. The group ranks a solid No. 34 among the 197 industries IBD tracks.
Transforming Industries With Metaverse, AI Trends
AI, machine learning, data analytics and cloud computing continue to weave their way into virtually all aspects of our lives. In turn, Nvidia has embedded its technology into a staggering array of industries. Its work in AI and the metaverse — the 3D internet — is transforming the world's largest industries.
The Silicon Valley-based semiconductor and gaming graphics pioneer continues to launch a string of new initiatives. Just this month, Nvidia unveiled its AI-on-5G system. Together with NTT Docomo, Fujitsu and others, it aims to deliver immersive graphics, metaverse applications and computer vision from a single server.
The chip designer is also using AI to transform genomics.
Nvidia Sparks Big Growth Estimates
Building on its presence as a leader in data centers and gaming, the rise of AI chips adds to Nvidia's growth opportunities.
On Feb. 22, Nvidia delivered a beat-and-raise report driven by its data center segment, which includes AI chips.
With the tech industry battling for AI supremacy, the advanced chips needed for "generative AI" such as the ChatGPT chatbot are key.
While both profit and sales growth took a hit in 2022, the earnings outlook for Nvidia over the next few years drives the institutional demand noted earlier.
| Year | Date of estimate | EPS est. | Est. % chg. |
|---|---|---|---|
| 2024 | 2/25/2023 | $4.80 | 44% |
| 2025 | 2/25/2023 | 5.14 | 7% |
| 2026 | 2/23/2023 | 3.53 | -31% |
| 2027 | 8/25/2022 | 9.75 | 176% |
Source: FactSet |
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NVDA stock currently holds a B SMR Rating, which tracks sales growth, profit margins and return on equity. Its debt-to-equity ratio stands at 41%, earning a passing rating in IBD Stock Checkup.
NVDA Stock In Buy Zone
After reporting earnings on Thursday, Nvidia gapped up to a 14% gain. NVDA stock continues to hold and add to that move.
The relative strength line spiked and could soon reach new levels. Nvidia still has plenty of ground to make up to reach previous highs.
As NVDA stock has soared since the end of last year, its 10-week moving average has also climbed sharply. The 10-week line now trades well above its 40-week benchmark. Also note how Nvidia found support at its 21-day exponential moving average just before it gapped up on earnings.
The stock now trades around 28% above its 50-day line, so a temporary pullback to digest those gains would not be surprising. Nvidia is currently working on its ninth straight up week.
With the buy zone ranging from 230.59 to 242.12, the stock currently trades just under 238.
Follow Matthew Galgani on Twitter at @IBD_MGalgani.
