(Investor's Business Daily) - Nvidia stock (NVDA) edged higher and tested a key level on Thursday.
The broader AI trade recently received a lift after Nvidia Chief Executive Jensen Huang said demand is "really, really high" for Nvidia's Blackwell graphics processing units. Is Nvidia stock a buy or sell now?
On Thursday, Susquehanna said Wall Street analysts foresee Amazon (AMZN), Alphabet[ticker symb=GOOGL], and Microsoft (MSFT) – the largest cloud-computing businesses – raising their capital spending by roughly 63% from last year's levels. Analysts expect such an increase to result in 58% revenue growth for Nvidia for 2025, Susquehanna said, Barron's reported.
Nvidia shares fell Wednesday after Texas Instruments (TXN) warned of a slowdown in the chip industry's recovery. The company projected fourth-quarter sales of $4.4 billion at the midpoint, below Wall Street's view of $4.5 billion.
Magnificent Seven Earnings Ahead
Nvidia has set Nov. 19 as the release date for its fiscal third-quarter report. Elsewhere among the Magnificent Seven companies, Alphabet will release its results Oct. 29, along with Meta (META), and Microsoft. Apple (AAPL) follows on Oct. 30.
Taiwan Semi Delivers Earnings Beat
Nvidia stock recently got a boost after its chip manufacturer, Taiwan Semiconductor (TSM), beat analysts' views for its third quarter. Also, midpoint sales guidance for the current quarter of $32.8 billion exceeded Wall Street's $31.55 billion target.
Taiwan Semi's report arrived a day after an AI consortium led by BlackRock (BLK) said it is buying Aligned Data Centers in a deal worth around $40 billion. Nvidia and Microsoft (MSFT) are among the founders of the Artificial Intelligence Infrastructure Partnership.
The deal adds to the reasons the market's AI trade has strengthened recently. Last month, Nvidia said it was investing $100 billion in ChatGPT creator OpenAI.
Oppenheimer analysts said Nvidia was one of their top picks. They have an outperform rating and $225 price target for Nvidia stock.
In addition to Huang's upbeat view on demand for Nvidia chips, he confirmed in his recent CNBC interview that Nvidia is participating in billionaire Elon Musk's xAI artificial intelligence venture.
Nvidia Stock: OpenAI Partnership
Under the OpenAI/Nvidia partnership, OpenAI will deploy at least 10 gigawatts of AI data centers running Nvidia processors.
But the Nvidia/OpenAI deal could raise antitrust concerns, Andre Barlow, an antitrust lawyer with Doyle, Barlow & Mazard, said, according to a recent Reuters report, indicating the partnership may capture the Department of Justice's attention.
Nvidia Stock: OpenAI Partnership
Under the OpenAI/Nvidia partnership, OpenAI will deploy at least 10 gigawatts of AI data centers running Nvidia processors.
But the Nvidia/OpenAI deal could raise antitrust concerns, Andre Barlow, an antitrust lawyer with Doyle, Barlow & Mazard, said, according to a recent Reuters report, indicating the partnership may capture the Department of Justice's attention.
China's Chip Scrutiny
Nvidia shares in mid-September fell after The Financial Times reported that China's Cyberspace Administration ordered major tech companies to stop buying artificial intelligence chips made by Nvidia.
Meanwhile, China's State Administration for Market Regulation was reported to be investigating whether Nvidia breached the country's antitrust rules by acquiring Mellanox Technology in 2020.
Nvidia said it had received approval "from all necessary authorities" to move forward with its planned acquisition of the network technology group.
The Information recently reported that Nvidia had ordered component makers of its China chip to stop production. This comes after the Cyberspace Administration of China had asked Nvidia in July to explain if its chips could be tracked or shut down remotely.
Huang said the chips do not have such capabilities. Separately, the AI giant may also be working on a new chip for China that may be more powerful than the H20, Reuters reported.
Nvidia Stock: Second-Quarter Results
The company in late August reported fiscal second-quarter earnings of $1.05 per share, topping the estimate of $1.01 per share. Sales of $46.74 billion beat views of $46.05 billion. Nvidia reported zero sales from its China H20 chip and did not include H20 sales to China in its fiscal third-quarter revenue outlook of $54 billion.
Wall Street was expecting $53.43 billion. The company also announced a $60 billion stock buyback.
Nvidia's China Revenue Deal
In August, Nvidia struck a deal that secured a license to sell its H20 AI chips in China, but, in exchange, the company will give 15% of its revenue from chip sales in China to the U.S. government.
Nvidia's revenue deal could invite scrutiny, according to Doug Jacobson, an international trade attorney at Jacobson Burton Kelley, Barron's reported. "We're far beyond uncharted waters. We're in an uncharted universe," Jacobson said. He noted the State Department is able to charge export-license fees related to defense technology, but the fees are not based on earned revenue.
A fee arrangement such as Nvidia's may run counter to a statute at the Bureau of Industry and Security, an agency that manages export controls, Aiysha Hussain, a former BIS senior adviser, told Barron's.
Nvidia placed an order for 300,000 H20 chips with Taiwan Semiconductor, adding to an existing inventory of 600,000-700,000 chips, Reuters reported in late July, citing unnamed sources. In 2024, Nvidia sold around 1 million H20 chips, the report said, citing research firm SemiAnalysis.
A $4 Trillion Market Cap
In July, Nvidia became the first company to hit a $4 trillion market cap, overtaking tech titans Apple and Microsoft.
In terms of its 12-month price performance, Nvidia has outperformed 85% of all other stocks in Investor's Business Daily's database.
Funds own 41% of Nvidia's outstanding shares, according to IBD MarketSurge. Going by its Accumulation/Distribution Rating of C, it appears that funds are currently neutral on the stock. The rating measures price and volume action over the last 13 weeks.
The AI chip behemoth has a top-level Earnings Per Share Rating of 99. Further, the stock's all-around strength, or Composite Rating, sits at 99.
Is Nvidia Stock A Buy?
Looking at chart signals and technical measures can help investors assess whether Nvidia stock is a buy or sell now.
Nvidia is below a flat base's entry at 184.48 and is testing its 50-day moving average. The stock is not a buy now.
By Vidya Ramakrishnan
