Nvidia (NVDA) was little changed Friday even as long time leader in personal computers and partner Dell (DELL) fell after earnings. But for investors, the larger question is whether Nvidia is a buy now.
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On the conference call, Dell's Chief Operating Officer Jeffrey Clarke made note of Nvidia's dominance in the artificial intelligence server market.
On Tuesday, Nvidia shares soared above the 1,100 level for the first time after Tesla CEO Elon Musk indicated the AI chip leader would be a supplier for his AI startup xAI. Musk's startup raised $6 billion in the latest round of funding over the weekend and plans to build a supercomputer to support its AI chatbot.
Meanwhile, Nvidia's market cap is approaching $3 trillion, a milestone that Magnificent Seven stockMicrosoft (MSFT) has achieved.
Shares of Nvidia rose to record highs after fiscal first-quarter results beat estimates yet again late last Wednesday.
The AI chip leader also announced a 10-for-1 stock split effective June 7. That will bring the price of one share down to just over 100. But the split could go beyond just lowering the price of each share. A lower price would make Nvidia a candidate for the Dow 30, which is a price-weighted index.
Previously, Apple (AAPL) and Amazon.com (AMZN) joined the Dow after stock splits.
First Quarter Results
Nvidia's first-quarter sales grew 262% to $26 billion while earnings of $6.12 per share were 461% higher.
On Tuesday of last week, the AI leader teamed up with Magnificent Seven software leader Microsoft to make the latest AI software available on Nvidia's graphic processing units.
Nvidia shares rose past a handle buy point after the Google AI Conference showed different ways in which artificial intelligence will improve search. The search giant also previewed an Android feature that will alert users to scams during a phone call. While Google's tensor processing units are rivals to Nvidia's chips, Nvidia dominates the data center AI chips market.
Ahead of the earnings report, analysts at Baird, Susquehanna and Barclays increased their price targets.
Nvidia stock holds an Accumulation/Distribution Rating of B-.
Nvidia Stock Soars Past Buy Point
Chart patterns are good ways of telling when to buy or sell a stock. Nvidia's chart shows the stock has cleared a 974 buy point. The stock is already extended according to IBD MarketSurge.
On April 24, Nvidia entered into an agreement to buy Run.ai. According to TechCrunch, the price tag is $700 million. Run.ai helps developers use AI tools more efficiently and reveals Nvidia's road map and priorities. Run.ai works with Nvidia's Cloud AI product that helps businesses get "instant access to an AI supercomputer from a browser."
The AI stock had a huge 239% run in 2023 and is up 125% so far this year.
Nvidia Stock: A Beat-And-Raise Fourth Quarter
Nvidia delivered yet another beat-and-raise quarter in February. Earnings of $5.16 a share on sales of $22.1 billion beat fourth-quarter views of $4.59 and $20.4 billion, respectively.
Earlier, the company said the limited supply of AI chips was the biggest challenge to growth. Customers may also wait for the next-generation B100 chip that is expected in coming quarters.
Baird analysts recently said this is a good thing. B100 chips will have better performance and will likely have a higher average selling price.
The maker of AI chips also disclosed its recent stakes in several smaller artificial intelligence plays in a filing with the Securities and Exchange Commission.
Nvidia Stock: AI Products Drive Growth
Nvidia has earned a reputation for being a trailblazer. The company was an early pioneer in the graphics processors that many say drastically improved computer gaming. Along with gaming, Nvidia chips now are used in such industries as health care, automobiles and robotics.
In March 2023, generative AI took a leap forward with OpenAI's ChatGPT. According to Nvidia Chief Executive Jensen Huang, Nvidia's AI-capable supercomputer paved the way for the "iPhone moment of AI."
That helped Nvidia turn the tide on its results. It reported three quarters of declining year-over-year sales and four quarters of tapering earnings. But then the company achieved record top- and bottom-line growth in the two most recent quarters.
Overall worldwide AI chip revenue will grow 26% from $53.4 billion in 2023 to $67.1 billion in 2024, according to a recent report from research firm Gartner. That is expected to double to $119 billion by 2027.
Nvidia's graphic processing units help accelerate computing in data centers and AI applications.
Top Ratings For Nvidia
Nvidia stock boasts a best-possible score of 99 on both its Composite Rating and EPS Rating. Its Relative Strength Rating of 98 also shows that it outperforms the vast majority of stocks in the Investor's Business Daily database.
Nvidia also is one of the Magnificent Seven stocks that led the 2023 stock rally. The other stocks are Apple, Microsoft, Alphabet (GOOGL), Meta Platforms (META), Tesla (TSLA) and Amazon.com. Some of these tech titans are customers that rely on Nvidia's advanced chips. Nvidia is also one of the stocks forecast to outperform the market in 2024.
Nvidia stock currently ranks first in the fabless semiconductor group, which holds the lofty No. 12 spot among IBD's 197 industry groups. The AI stock frequently appears on the IBD 50, IBD Sector Leaders and Tech Leaders lists. Further, the stock is on IBD Leaderboard.
Is Nvidia A Buy?
Nvidia has surged past a 5% buy zone from a handle buy point of 922.20, so it is not a buy right now. It is also extended from another entry at 974. Buying when a stock is extended is risky. It's best now to wait for another base or follow-on buy point to make an initial position in the AI chip stock.
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