Since late last month, Nvidia (NASDAQ:NVDA) stock has moved up after slumping for much of October. Admittedly, the broad market’s movement during this time frame helps to explain this rebound. However, while not for certain, this may not be the only reason sentiment for this widely-followed AI chip play has shifted back in the bullish direction.
Investors are perhaps coming to their senses regarding two concerns that have emerged lately. Market participants may be realizing they acted too hastily to the news/developments driving these concerns. But while this “Magnificent Seven” component has experienced a partial recovery over the past week, don’t assume you’ve missed your chance at locking down a long-term position.
NVDA Stock: Making Mountains out of Molehills
As you likely know, two things have really affected Nvidia’s price performance recently. First, concerns that the U.S. Government’s sudden crackdown on AI chip exports to China will materially affect Nvidia’s future results.
China is regarded as a key market for the company, so people perceived this as very bad news for NVDA stock, as it may mean growth in the coming quarters falls short of expectations. Second, the further market digestion of “higher for longer” interest rates has also been a negative for NVDA’s price performance.
High interest rates bode badly for economic growth, and hence could hurt demand for Nvidia’s AI and non-AI chips. High interest rates also suggest a continued contraction in this stock’s forward earnings multiple. However, after bailing on these concerns, the fair-weather fans may be jumping back in, after realizing they made mountains out of molehills.
As I pointed out previously, while the China AI chip export ban is not a positive development, high overall demand for AI chips may more than make up for it. High interest rates may not affect booming demand as much as expected, and the resultant growth helps to justify NVDA’s rich valuation.
Why You Haven’t Missed the Boat
Investors who bought NVDA stock during the late-October sell-off, are sitting on some nice gains right now. However, if you didn’t hop in a week or two ago, and are still sitting at the dock, you haven’t “missed the boat.”
That’s not to say shares are going to be immune from near-term turbulence, but it’s not as if the opportunity here with Nvidia was to get in at below $400 per share, and cash out above $450 per share, before this stock’s pullback resumed. In fact, the next big move for shares could happen ahead of the Thanksgiving Holiday.
Post-market on Nov. 21, two days ahead of Turkey Day, Nvidia will release its latest quarterly results and updates to guidance/outlook. Per one sell-side analyst (Melius Research’s Ben Reitzes), Nvidia’s upcoming earnings release may further assuage China-related worries.
Not only that, Reitzes also argues that it’s possible the company reveals more details about its sale of AI software. All of this could mean a very positive response to results. A big post-earnings rally, similar to the ones that happened earlier this year, may be within the realm of possibility.
Bottom Line: A Strong Long-Term Buy
Beyond the potential for a continued rally in the near-term, don’t forget substantial long-term upside potential remains with NVDA.
AI chip demand keeps growing. Nvidia holds dominant market share in AI chips. Add in the additional boost resulting from a demand recovery for PC and gaming chips, and this company is well-positioned to keep delivering outstanding earnings growth in the foreseeable future.
Based upon the latest earnings forecasts for the next two fiscal years (ending in January 2025 and January 2026, respectively), it may not take long for NVDA to re-hit prices north of $500 per share. Based upon the top end of FY2026 forecasts, hitting $600, $750, or even more per share could be well within reach.
With sentiment bouncing back, and plenty in play to provide a further lift, consider NVDA stock a strong long-term buy at current prices.
NVDA stock earns an A rating in Portfolio Grader.
On the date of publication, Louis Navellier had a long position in NVDA.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
