Nvidia is capitalizing on the AI craze in the market, with returns of over 100% this year. The ChatGPT has once again directed investors’ attention towards the rapidly expanding AI sector. In 2022, the semiconductor industry suffered from low demand for PCs and electronics, leading to significant declines for Nvidia. However, there is hope for recovery now at those sectors as well. The possible turnaround and the AI adoption trend have led to a possible cup and handle formation, with the key level set at 350. Although the price still has a way to go before reaching this level, the momentum is currently positive. However, the absence of any corrections or profit-taking may be a cause for concern in the short term.
The massive surge in Nvidia’s stock price was primarily driven by high expectations rather than financial data, resulting in financial ratios reaching alarming levels. The price-to-earnings data, in particular, has reached concerning levels. Today’s earnings report will be crucial in determining the extent to which these expectations align with reality. The expected earnings per share is 92 cents, and revenue is projected to reach $6.52 billion, with $3.91 billion of those attributed to data center sales.
Prior to the report, various technical indicators also reached key levels. The relative momentum index is approaching its maximum, with the signal moving average currently exceeding 83. The MACD has also surpassed 32. During the previous peak in 2021, the MACD reversed from 36, which occurred at a much slower rate compared to the current steep upward trend.
If Nvidia fails to meet the high expectations set by today’s earnings report, we may see some profit-taking and a sell-off in the market. The technical indicators have reached alarming levels, signaling a potential correction. However, in the long term, any sell-off could present a buying opportunity. Nvidia has a promising growth story, with increased adoption of AI technology. Additionally, from a technical standpoint, a potential cup and handle formation holds significant return potential if it materializes.
Conversely, if the earnings report exceeds expectations, it could trigger a jump in stock price towards the key level of 350. This level may present an opportunity to realize some profits based on the incoming financial data.
