Nvidia’s stock price (NASDAQ: NVDA) has seen significant volatility, even though its Q4 earnings surpassed expectations with strong revenue and earnings per share. The equity has made a short-term recovery, reclaiming the $120 support zone, but technical indicators suggest a potential for a sustained correction.
Nvidia’s stock nears “implosion mode”
In February, Nvidia ended positively at $124.80, closing the last trading session up 3.87%. However, over the week, NVDA’s share price declined nearly 9%, finishing February below the 200-day moving average (MA), a typically bearish signal. This is the second time NVDA has closed at this level since January 2023.
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Trading analyst Patrick Karim warned on February 27 that Nvidia is nearing “implosion mode,” pointing to the breakdown of its rising trend line. NVDA has dropped below its 12-day and 36-day moving averages, which are crucial for maintaining bullish momentum. The volume profile indicates weaker support below current levels, suggesting the stock price might correct and trade between $90 and $95. Nick Schmidt, co-founder of TraderLion, also expressed a bearish outlook on March 1, predicting an accelerated drop but noting it could present a buying opportunity post-correction.
Nvidia’s strong fundamentals are notable, especially its dominance in artificial intelligence (AI), with a Q4 revenue of $39.33 billion. This was primarily fueled by its AI data center business, which constitutes 91% of total sales. Data center revenue rose to $35.6 billion, marking a 93% year-over-year increase, driven by strong demand for its Hopper and next-gen Blackwell AI chips. Despite anticipated growth slowing, the Q1 2025 guidance suggests a 65% year-over-year growth rate, considerably down from last year’s 262%. Nevertheless, the company maintains confidence in ongoing AI-driven demand.
Nvidia has initiated a $33.7 billion share buyback program, bolstering its stock’s bullish outlook. Investment strategist Shay Boloor remarked on March 1 that the stock is not peaking yet, highlighting that the Blackwell architecture is effectively enhancing AI reasoning capabilities and positioning Nvidia centrally in the compute revolution. CEO Jensen Huang anticipates a 100-fold demand for AI reasoning, positioning Nvidia well to meet these requirements with the Blackwell chips.
On February 27, following the earnings report, Nvidia received seven new buy ratings from analysts, reinforcing confidence in its AI growth trajectory. Rosenblatt set a street-high price target of $220, implying a potential 77% upside from current levels. Firms such as Truist, Bank of America, and Cantor Fitzgerald have reiterated their buy ratings, with D.A. Davidson maintaining a hold at $135.
Nvidia shares have remained stagnant for much of the past six months, reflecting only a 10% increase compared to an 8.2% gain for the Nasdaq. Investors have tempered expectations regarding the company’s ability to sustain extraordinary revenue growth, despite its significant market position in the tech sector. CEO Huang has noted “incredible” demand for the Blackwell processors, with key customers poised to invest billions in AI infrastructure over the coming years. Nvidia anticipates Q1 sales to rise 61% year-over-year to $42 billion and earnings to increase nearly 55% to $27 billion. Analysts predict a fiscal year tally exceeding $200 billion, although ramping production of Blackwell chips may reduce profit margins before returning to mid-70% levels later in the year.
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Concerns have surfaced among retail investors, with the American Association of Individual Investors reporting that 61% of those surveyed expressed a bearish outlook, the highest level in a year. Such sentiment arises amid fears of an economic slowdown due to potential tariffs, persistent inflation, and higher interest rates, coupled with a retreat in AI-related stocks. While Nvidia has not faced significant declines, its shares have shown little movement compared to their values six months ago.
Options market data also indicate a cautious, if not bearish, outlook on Nvidia stock, with rising prices for put options reflecting expectations of notable near-term declines. Nvidia may experience longer-term challenges if spending plans from major customers like Microsoft, Amazon, Meta Platforms, and Google fail to yield expected returns. D.A. Davidson analyst Gil Luria noted that while Blackwell supply is predicted to ramp quickly, a decline in demand for Nvidia’s compute capabilities may be unavoidable as customers reassess their returns on AI investments.
Much of Nvidia’s demand may be already factored into its share pricing, which has seen an increase of more than $2.1 trillion in market value since it initiated the AI investment wave in May 2023, significantly outperforming the S&P 500. Analyst Scott Acheychek asserted that while Nvidia’s extraordinary gains may have been priced into the stock, the potential for future catalysts, such as advancements in AI infrastructure or regulatory changes in the semiconductor industry, remain a consideration for investors. Benchmark analyst Cody Acree also views the current sell-off as an opportunity for investors to establish a stake in Nvidia, described as a key player in the ongoing AI transformation in technology.
Featured image credit: Nvidia
