Interest rates, inflation, industry trends, politics, and… Nvidia (NVDA).
They have one important thing in common: they can single handedly move the stock market up or down.
It’s not often that one company can shoot stocks higher or send them tumbling, but Nvidia has achieved that rare status.
That makes NVDA an important company to watch. Not just because so many people own it (including me), but because it affects so many other stocks that even more people own.
Nvidia makes advanced computer chips. But more importantly, those chips are in extremely high demand for artificial intelligence applications. So this company’s earnings yesterday didn’t just tell us about the company itself but about the direction of AI as a whole.
It’s the third-biggest company in the world by market capitalization, with its $2.9 trillion valuation not far behind Apple (AAPL) in the top spot at $3.5 trillion and Microsoft (MSFT) in the second at $3.1 trillion.
NVDA is the poster child of the AI craze, and it was up over 150% for the year as of yesterday’s close. That’s almost unheard of for a stock that big.
But today’s 6% drop took away about $175 billion in market value, which is kind of crazy when you think about it.
So is NVDA a buy, sell, or hold? Let’s take a look at its earnings report and the latest data to see – including the all-important impact of Big Money.
Priced for Perfection
You might not guess it based on the stock’s drop today, but Nvidia delivered triple-digit growth and beat estimates on both the top and bottom lines, thanks to continuing strong demand for its AI products.
The company generated revenue of $30 billion in the second quarter (a record), a 122% surge over a year ago. That’s well over analysts’ estimates of $28.6 billion. Earnings of 68 cents per share also beat estimates of 64 cents.
The big reveal, though, was that Nvidia’s data center revenue – which includes its chips used for AI – increased 154% to $26.3 billion. This phenomenal growth was driven by strong AI adoption among cloud computing and data center operators.
NDVA guided for revenue of $32.5 billion here in the third quarter, which would be 80% more than last year. That’s smaller than the triple-digit growth we’re used to seeing from the company, but it’s still impressive. Most companies would kill for that “slower” growth.
Still, investors can get spoiled, so some decided that wasn’t good enough and decided to sell. It wasn’t enough to bring down the entire market, though. The Dow Jones Industrials actually hit a record high, and the S&P 500 – clearly feeling NVDA’s weight – hung around flat.
What’s Next for NVDA?
Investors who sold today worry that Nvidia’s growth may be slowing. Investors who bought today think better times lay ahead.
That’s the beauty of markets. You need buyers and sellers. Both think they are making the best move, but who’s right?
Time will tell of course, but that’s why I developed my Quantum Edge system – to put the odds strong in my favor when I make such decisions.
Nvidia continues to rate incredibly high, which means a high probability of even more gains in the future.
Source: TradeSmith Finance
Its impressive Quantum Score of 84.5 is in my target buy zone between 70 and 85. That Fundamental Score of 79.2 does not include the very latest results, but seeing how impressive they are, it won’t change much. That number indicates the quality and strength of the business.
And despite a bumpy June and July, NVDA shares rebounded from $100 to $130 in two quick weeks, which elevated its Technical Score to 88.2. Anything above 90 starts to get overheated, so today’s pullback isn’t concerning when shares have been in strong demand.
As for Big Money – the money that moves stocks – my quantitative analytics system shows 26 buy signals – those flashing green lights below – so far this year.
Source: MAPsignals.com
With institutions controlling about 90% of daily trading, following those money flows are critical and something I look for in every stock I recommend.
Those green lights are what stood out to me in 2017 when I recommended NVDA to my dad. He’s now sitting on nearly 4,000% gains. Here’s what those signals looked like back then:
Source: MAPsignals.com
That, combined with an excellent Quantum Score of 77.6 at the time, made me confident in recommending my dad to invest. And it’s paid off.
Nvidia remains an impressive company at the center of the AI revolution that has risen to almost mystical status. Everyone wants to know when that mystique will tarnish, but based on its Quantum Edge ratings and those all-important Big Money buy signals identified by my proprietary algorithms, that doesn’t look likely anytime soon.
I’ll be keeping my eye on Nvidia, and other high-quality stocks in my system, and I hope you will, too.
Talk soon,
Jason Bodner
Editor, Jason Bodner’s Power Trends
P.S. I use that very same system and algorithms in my own investing and with every recommendation I make to my Quantum Edge Pro subscribers.
In fact, I just recommended a new stock earlier today that flashed two of those coveted green lights (buy signals) in the last three weeks. It’s one of the strongest stocks in the market right now.
If you’d like access to this stock and others, click here to learn more.
Disclosure: On the date of publication, Jason Bodner held a position in Nvidia (NVDA) mentioned in this article.
