NVIDIA Corporation NVDA witnessed a meteoric rise over the past few years due to the advent of artificial intelligence (AI). Its recent share repurchase has installed confidence among investors and the highly anticipated launch of the new Blackwell architecture should fuel its stock price.
However, American regulators launched a probe into the tech giant’s contracts, which raised a lot of apprehensions about the NVIDIA stock’s future trajectory. NVIDIA’s shares were subjected to huge selloffs lately on Wall Street. So, is this the right time to sell the NVIDIA stock, or will remaining bullish be helpful? Let’s have a look –
NVIDIA’s Volatility Dwarfs Its Peers
NVIDIA saw around $406 billion being wiped out from its market value last week, which weighed heavily on Wall Street. The largest chipmaker witnessed wild swings in its share prices over the past 30 days that made even the most volatile asset, Bitcoin (BTC) look calm.
NVIDIA’s 30-day realized volatility touched a two-year high, dwarfing the level of gyration among Magnificent 7 peers and meme stocks. The NVIDIA stock recorded its worst two-week stretch in two years on Friday after the U.S. Department of Justice summoned the chipmaker in an escalating antitrust issue.
September, anyhow, isn’t a good month for NVIDIA. According to the Dow Jones Market Data, the chipmaker’s shares, on average, declined 2.4% in September, more than the broader S&P 500’s decline of 1.2%. However, the long run bodes well for the NVIDIA stock that has rewarded investors handsomely this year, with its shares up more than 100% so far.
Share Repurchase Plan – A Good Sign for NVIDIA
NVIDIA recently approved a new $50 billion share repurchase. This indicated that the management is hopeful about the company’s future business endeavors.
Stock buybacks reduce the number of outstanding shares and jack up the value of the remaining shares, a blessing for shareholders. After all, decreasing the number of outstanding shares leads to an increase in share prices.
Anyhow, the NVIDIA stock has been trading above the 200-day moving average (DMA) so far this year, signifying a long-term uptrend (read more: NVIDIA Approves $50 Billion Stock Buyback: Time to Buy?).
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NVIDIA’s Blackwell to be Groundbreaking
NVIDIA is all set to launch its cutting-edge Blackwell AI chip later this year, and that can be a game changer. This is because Blackwell is more than just a graphic processing unit (GPU). Its platform will provide more AI throughput than the present Hopper platform.
The new Blackwell GPU will offer high-speed communication and greater processing power, which are needs of the hour. And if history repeats itself, the Blackwell launch would lead to an uptick in NVIDIA’s share prices. After all, NVIDIA’s shares did soar by double-digits in the three months following the launch of the previous two platforms – Hopper and Ampere.
2 More Reasons to be Bullish on the NVIDIA Stock
CEO, Jensen Huang recently said that a huge chunk of data would migrate from central processing units (CPUs) to GPUs, a blessing for NVIDIA. This is because NVIDIA is the worldwide leader in GPUs. The GPU market size is expected to grow to $1,414.39 billion by 2034 from $56.55 billion in 2023, per Precedence Research.
GPU Market Size 2023 to 2034 (USD Billion)
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Image Source: Precedence Research
NVIDIA’s move to enter the ever-growing gaming space with product line, GeForce, and industrial metaverse in collaboration with Siemens will act as a tailwind for the company. Hence, NVIDIA’s earnings outlook for the current year looks promising, with the $2.80 Zacks Consensus Estimate for NVIDIA’s earnings per share up 76.1% year over year.
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NVIDIA Stock is Pricey – Is it the Right Time to Buy?
Given the positives, the NVIDIA stock is destined to scale upward despite facing bouts of volatility in recent times. Notable brokers have increased the average short-term price target of NVDA by 39.2% from the stock’s last closing price of $107.21. The highest price target is set at $200, an upside of 86.6%.
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However, NVIDIA stock at the moment is expensive compared to its arch-rivals. As per the price/earnings ratio, NVIDIA stock currently trades at 46.9X forward earnings. But its rivals, QUALCOMM Incorporated QCOM and Broadcom Inc.’s AVGO forward earnings multiples are 15.8X and 28.9X, respectively.
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Hence, investors should wait for the current entry point or let NVIDIA’s shares fall further so that purchasing the shares doesn’t burn a hole in their pockets. And those who have already bought NVIDIA’s shares should hang on to it. After all, NVIDIA stock is for the long run, as demand for AI models is here to stay.
NVIDIA has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
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