Nvidia (NASDAQ:NVDA) reported earnings last night and investors loved them. NVDA stock spiked 7%… then faded back to red. This is more likely due to overall stock market malaise than Nvidia disappointment, however. We are still dealing with geopolitical headlines a major economic war between the U.S. and China.
As of this writing, NVDA had turned green again, up about 1%.
The NVDA options markets had priced in a +/- $12 move today and the after hour spike perfectly took the stock to the upper edge of that limit. The open interest in the options markets also suggested upside pressure with resistance this week at $173 and that was exactly where it faded. So the overnight action unfolded exactly as planned. Now the bulls need some follow through as the market shakes the overnight jitters off. And the geopolitical headlines need to cooperate.
These last two days are quite the change from earlier this week when equities like NVDA were in free fall. Wall Street panicked from headlines that China retaliated against the new U.S. tariffs. Yet Thursday, NVDA stock closed slightly green ahead of the event.
This small upside move was impressive since the Thursday open was scary for chip stocks. They all collapsed on headlines that the U.S. is acting against Huawei. So traders then extrapolated that all chip companies are vulnerable too. But this morning the sector is once again trying to find footing as Applied Materials (NASDAQ:AMAT) is helping with its positive reaction to their earnings.
NVDA beat both earnings and sales. But more importantly, they raised guidance for the future. So they over-delivered and promised that they will do even better next time. This is reason to hold or start accumulating a position in Nvidia stock.
NVIDIA used to be focused on graphics cards, but now they are set up to benefit from several of the hot topics for the next few decades. They have transformed into a dominant player in any tech that needs a brain. From computers on our desks or in our pockets, to ones that drive our cars.
Last night’s report shows that NVIDIA has returned to growth, and gaming and data centers are exciting areas of opportunities once more. Also Artificial Intelligence segments will accelerate as adoption of AI grows world wide. This is a budding trend that will dominate in the future. Every aspect of our technology will have AI built into it. Nvidia stock will surely benefit from this trend.
Management also noted that the acquisition of Mellanox (NASDAQ:MLNX) will close by year end. So the noise from the assimilation will die down. They outbid Intel (NASDAQ:INTC) so they can create more runway in their own data center efforts. This will have incremental profits soon enough.
The Bottom Line on Nvidia Stock
So in summary, Nvidia stock is not a sell here. The management team has proven that they are still on top for their game. They are growing demand for gaming, cloud tech and AI. So they left nothing for the sellers to use as weapons.
In addition, there is also the surprise revival of the Crypto-craze as Bitcoin rallied 100% in a month. In the past, NVDA and crypto moved in tandem, but Nvidia has outgrown this. Bitcoin is no longer part of the NVDA investment thesis so it’s pure gravy. So it’s not a threat to the rally since it’s not a major peg that could break.
The experts on Wall Street agree that Nvidia stock is a BUY. The average price target is close to $200 per share, which also shows that Wall Street believes that the upside opportunity outweighs the downside risks.
Nicolas Chahine is the managing director of SellSpreads.com. As of this writing, he did not hold a position in any of the aforementioned securities. You can follow him as @racernic on Twitter and Stocktwits.