Bitcoin
Pearl
Starknet
Zerebro
NEAR Protocol
Solana
Quantus
Key Insights:
- NVIDIA stock price has retreated this month and erased over $240 billion on value.
- The stock fell as investors took a breather after a spectacular surge earlier this year.
- The main catalyst for the stock will be the upcoming earnings next week.
NVIDIA stock price has pulled back this month as market participants took a breather. It retreated from a high of $184.96 to the current $175, leading to a $240 billion wipeout as the market capitalization fell from $4.55 trillion to $4.31 trillion. So, is NVDA stock a good buy or sell?
Why NVIDIA Stock Price Has Pulled Back This Month
There are a few potential reasons why the NVDA stock price has retreated in the past few weeks. First, while Donald Trump reopened its shipments of its H20 chips to China, officials there have not welcomed it back with open arms, with regulators investigating whether its chips have a backdoor that the United States can use.
Chinese officials have also argued that the H20 chips don’t have an edge over locally made ones. Their goal is to ensure that companies in the biggest semiconductor market use those made by local companies like Huawei.
Second, NVIDIA stock price has pulled back as investors have soured on technology companies amid the potential jitters on the Federal Reserve. Recent economic numbers showed that consumer and producer inflation data have moved further away from the Federal Reserve’s target of 2.0%.
As such, there are concerns that the bank will not cut interest rates in the upcoming meeting in September. Odds of a cut have fallen slightly in the past few days, with those on Polymarket moving from nearly 100% earlier this month to 70% today.
Tech stocks like NVIDIA do well when the Fed is cutting interest rates, which explains why the Nasdaq 100 Index has dropped throughout the week.
Valuation Concerns Have Remained
Additionally, NVIDIA stock price has retreated amid concerns about its valuation, as it became a $4.3 trillion company. However, these fears seem unfounded as the company is relatively cheap.
Data shows that NVIDIA has a trailing 12-month PE ratio of 56. This ratio is higher than the S&P 500 multiple of 23 and the Nasdaq 100 ratio of 41, making it a bit expensive.
However, its forward PE ratio of 39 is on par with other top technology companies like Microsoft and Amazon. It is also much lower than that of Palantir, one of the fastest-growing AI companies in the US.
Also, NVIDIA’s PEG ratio of 1.7 is in par with those of other slower-growing companies in the technology sector.
NVDA Earnings Ahead
The next important catalyst for the NVIDIA stock price will be its earnings, which will come out next week.
These results will shed more light on the company’s performance and its growth in the second quarter.
Chances are that NVDIA will report a strong quarter after the recent strong numbers by companies like Microsoft, Amazon, Meta Platforms, and Taiwan Semiconductor.
The average estimate is that NVIDIA’s earnings per share will be $1.01, much higher than last year’s $0.68, while its revenues will jump by 52% to $45 billion. The company normally publishes stronger-than-expected financial results.
NVIDIA Share Price Analysis: Buy or Sell?
Technicals suggest that the NVIDIA share price could retreat after its financial results. The main risk is that it has formed a a bearish divergence pattern as top oscillators like the MACD and the Relative Strength Index (RSI) have pulled back this month.
NVDA stock also remains much higher than the 50-day and 100-day Exponential Moving Averages (EMA), meaning that it could go through a mean reversion, where an asset moves back to its historical averages.
Therefore, while the stock may surge after earnings, there is also a risk that it may have a brief pullback, as it did when it published its results in February this year. It dropped by 10% in a day, erasing billions of dollars in value.
As such, as with other companies, it is always important to be cautious when trading before earnings as the company may have some double-digit moves in either direction.
