Artificial intelligence stocks Nvidia and Arista Networks lead this weekend's watch list of five stocks near buy points. In addition to NVDA stock and ANET, the group includes Datadog, whose computer-network monitoring software business should get a boost from AI adoption.
Credit-card processing giant Mastercard and DexCom, a leader in glucose-monitoring systems for diabetes patients, round out the list.
DDOG stock is part of the flagship IBD 50 list of leading growth stocks, while NVDA is part of the IBD Leaderboard portfolio of elite stocks.
For now, the powerful stock market rally remains intact, after Wall Street dodged a possible bullet in Friday's jobs report. A big downshift in private-sector job growth, which helped corral the surging 10-year Treasury yield, should keep the Fed from panicking about the inflation outlook.
Nvidia and these other stocks have been moving sideways in recent days or weeks, largely because the overall market has been rangebound since mid-June. So be sure to read IBD's The Big Picture every day to stay in sync with the market direction and what it means for your trading decisions.
Nvidia Stock
NVDA stock ranks as the top S&P 500 gainer this year, up 191%, thanks in no small part to its blockbuster guidance on May 24 as it ramps up to meet massive demand for its AI-enabling chip technology.
Nvidia forecast Q2 sales of $11 billion, up 64% year over year, obliterating Wall Street's consensus estimate of $7.2 billion.
NVDA stock leapt 24% in the next session and has continued to push higher. That's despite news in late June that the Biden administration is moving toward tougher restrictions on AI-enabling chips to China.
Yet even amid that negative news, NVDA stock has hung tough. In each of the past three weeks, NVDA stock has moved up or down less than 1.5%, etching out a four weeks-tight pattern. That establishes a new buy point, if NVDA stock clears the top of the 439.90 range. Investors could use Friday's high of 432.14 as an early entry.
Still, a more constructive entry for investors might come if Nvidia carves out a new base, taking some time to digest its big gains. A mild pullback to its 21-day exponential average could also provide an opening.
ANET Stock
Arista sells computer network switches that speed up communications among racks of computer servers packed into "hyperscale" data centers. In 2022, Facebook-parent Meta Platforms accounted for 26% of Arista revenue, while Microsoft chipped in 16%.
ANET stock surged 23.5% in the three sessions following Nvidia's Q2 guidance. Demand for AI chips is seen as a precursor to demand for more computer networking bandwidth.
Still, just how rapid the impact of AI on the networking sector will be remains to be seen.
At a JPMorgan tech conference on May 23, Arista Chief Financial Officer Ita Brennan talked cautiously about a potential AI boost.
"We have deployed some AI use cases, but it's relatively small. I think we look at it as, it's a good underpinning of kind of future momentum and demand, particularly from some of the larger hyperscale customers."
After the late May surge carried ANET stock past a 171.44 buy point, shares pulled back below the 50-day moving average before bouncing. In recent days, ANET stock has found support at its 21-day line. A move higher from here could see ANET stock break a trendline sloping down from its May 30 high and offer an entry point.
The networking giant also has a new base with a 178.36 buy point.
DDOG Stock
Datadog operates a monitoring and analytics platform for software developers and information-technology departments. The company has a partnership with Amazon Web Services, the cloud computing unit of Amazon.com.
While worries over slowing cloud computing growth pressured Datadog stock in the first half of 2023, growing AI workloads should keep its services in demand.
DDOG stock has carved out a long, 47-week cup-with-handle base. DDOG has a 103.80 buy point, which is the top of the handle touched on June 2. Investors also could view the handle as its own flat base modestly above a bottoming base cleared in early May.On Friday, DDOG stock rose 1% to 98.02, leaving it about 6% shy of a buy zone. Shares briefly cleared the 100 level that had acted as ressitance
Mastercard Stock
Mastercard and rival Visa are showing strength at a time when the consumer is slowing and financial stocks have struggled. Yet as payment processors, they generate transaction fees but aren't exposed to deteriorating credit conditions. Plus, the recovery in entertainment and travel are still ongoing, and cross-border transactions are particularly lucrative for the credit-card processors.
On Friday, MoffettNathanson analyst Lisa Ellis raised her price target for Mastercard to 490 from 460, keeping an outperform rating. She cited "a long runway in consumer-to-business cash displacement, tangible progress in new payment flows, (and a) competitive moat strengthened by the pandemic."
MA stock flirted with a 392.20 flat-base buy point in recent sessions, before closing off 1.1% to 388.68 on Friday.
DexCom Stock
DexCom updated long-term financial guidance on June 23, saying it now expects 2025 revenue of $4.6 billion to $5.1 billion, up from $4 billion to $4.5 billion. That compares to $2.91 billion in 2022.
Shares initially retreated back to their 50-day moving average, but found support and reclaimed a 126.44 buy point, according to a MarketSmith analysis. DXCM stock dipped 0.8% to 126.71, still in a buy zone. DexCom has been bouncing off the 21-day line intraday in recent sessions.
