Nvidia Updated Analysis
Chart done on hourly timeframe. Nvidia’s dominance has come into question after the stock has struggled to get above the 1k mark last month, but it is important to note that although the stock is moving sideways, it is still very much in bullish control. It is not unusual that we saw Nvidia get rejected around 1k ahead of the successful break, this is something historically common in the market. The important part is that it has remained near the highs and they’re still delivering on analysts’ expectations.
In the short term, Nvidia’s reign can be attributed to Wall Street’s excitement around artificial intelligence. This is a similar story that we saw to Tesla a few years ago when there was a ton of excitement around electric vehicles. Tesla’s dominance went on for years before it finally corrected, which is likely the path for Nvidia as well. Right now Nvidia is trading at a price to earnings ratio of 75, that’s about five times the healthy average of 15, but some bulls are justifying the pricey valuation because of how fast Nvidia is growing. There are only two ways to bring down a valuation, either the stock’s price comes down, or they increase their profits. Bullish analysts are arguing that based on the way Nvidia’s profits are growing, it will adjust its P/E ratio over the coming quarters to a more reasonable level, which could explain why the stock is still holding so strong and many are reluctant to take profits.
For now, we see more upside from Nvidia in the coming six months with a target of around 1,200.00. It is on the higher risk side of investments considering their valuation so keep that in mind when positioning yourself. Nvidia will need to continue surpassing analyst expectations on their earnings in order to justify these highs.