Nvidia Stock Flips Key Resistance as Wedge Materializes as Broadcom Threat Looms

After weeks of falling, Nvidia stock price jumped to a two-week high and flipped a crucial resistance level. NVDA soared to a high of $205, up by 8% from its lowest level this month. It has also validated the highly bullish falling wedge pattern, pointing to further gains despite the looming threat from Broadcom.

Nvidia Stock Has Confirmed a Falling Wedge Pattern

NVDA stock price bottomed at $189 earlier this month as institutional demand for semiconductor companies waned. Recently, however, the stock has rebounded and moved above the upper side of the falling wedge pattern that has been forming in the past few weeks.

In most cases, this pattern leads to more upside as the two lines approach their confluence levels. This rebound began after the stock hit the crucial 200-day Exponential Moving Average (EMA).

It also happened after the stock dropped to the 61.8% Fibonacci Retracement level, where most rebounds happen. This retracement is drawn by connecting the March low to the May high this year.

At the same time, the two lines of the Percentage Price Oscillator (PPO) indicator have formed a bullish crossover and are rising. Therefore, the stock will likely continue rising in the coming weeks, potentially to the year-to-date high of $235. A drop below the support level of $190 will invalidate the bullish outlook.

Nvidia is Facing Major Competition Pressure From Broadcom

A key reason for the recent underperformance is the rising competition in the chip industry. All of Nvidia’s key clients continue building their chips, which they hope will replace Nvidia’s GPUs over time. Google’s TPUs have become some of the most successful of these ASIC chips.

One company fueling this growth is Broadcom, a company now valued at $1.8 trillion. Broadcom has used its history in the manufacturing industry to ink major deals in the past few months. The most significant one is its partnership with OpenAI.

In a recent statement, OpenAI showcased the new chip that it designed and one that Broadcom will manufacture. Broadcom will likely have a role in making ASIC chips for other companies.

At the same time, Broadcom is also competing with Nvidia in the networking industry. Earlier this month, the company announced a partnership with DriveNets, with the new DriveNets 2600SL expected to be shipped later this year.

It will enable a 100% liquid-cooled design, which will enable consistent thermal efficiency. These products will likely provide substantial competition to Nvidia’s products.

Big Tech Earnings Ahead

The next key catalyst for Nvidia stock will be the upcoming US big-tech earnings, which will provide more information about the AI space. The most important of these earnings reports will be TSMC, which makes Nvidia’s chips. A strong earnings report, which most analysts expect, will be a sign that its revenue growth continued.

Most importantly, Microsoft will publish its earnings on July 29, while Meta Platforms and Alphabet will release on the 22nd. Amazon will release on July 31. These results are important because these companies account for nearly 50% of its total revenue.

These companies will also provide more color on whether they plan to spend more money in the future. Signs that they plan to boost this spending will be bullish for NVDA shares.

Analysts expect Nvidia’s financial results to show its growth has accelerated. The average estimate is that its revenue nearly doubled in the second quarter to $91.73 billion. It is expected that its third-quarter revenue will jump by 80% to $102 billion.

Even in the face of high competition, Nvidia is still a bargain, trading at its lowest valuation multiple in years, which may make it a good investment to both value and growth investors.