Nvidia edged higher ahead of its second-quarter report at market close Wednesday. Is Nvidia stock a buy or sell now?
The sales outlook for its China H20 chip will be in focus when the company reports its second-quarter results on Wednesday. In May, the company took a $4.5 billion charge in its first quarter and warned of a $8 billion hit to sales for the second quarter, Reuters and others reported.
Analysts estimate earnings growth of 48%, or $1.01 in earnings per share, with sales growing 53% to $45.9 billion, according to MarketSurge data. William Blair analyst Sebastien Naji expects a beat-and-raise quarter and has an outperform rating with a price target of $205 for the stock, Barron's reported. The analyst expects zero revenue from China for the current quarter but anticipates China to boost Nvidia's outlook.
Susquehanna analyst Christopher Rolland raised his price target for Nvidia to $210 from $180 while maintaining a positive rating, according to Barron's on Thursday. However, in his earnings preview note, the analyst was cautious about Nvidia's revenue from its H20 chips.
Late Thursday, The Information 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.
On Friday, Chief Executive Jensen Huang said the chips do not have such capabilities, The New York Times and others reported. Further, the artificial intelligence chip behemoth may also be working on a new chip for China that may be more powerful than the H20, Reuters reported last week.
Nvidia stock undercut its 21-day moving average last week but reclaimed that level after a strong performance on Friday and Monday. Shares were just above the moving average on Wednesday.
Nvidia's China Revenue Deal
Investors recently began reacting to Nvidia's 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, noting 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. Advanced Micro Devices also struck a revenue agreement with the Trump administration.
Earlier, President Donald Trump threatened 100% tariffs on semiconductor chips but said he would exempt companies that were making chips in the U.S. or were planning to do so. Shares of Nvidia rose as Taiwan Semiconductor soared. Taiwan Semiconductor, a key supplier to Nvidia, has been expanding its U.S. domestic chip production and has a chip plant in Arizona.
Nvidia shares recently touched an all-time high of 183.88. The stock rallied after trade talks between the U.S. and China resumed. Treasury Secretary Scott Bessent said there were "the makings of a deal" with China.
Nvidia Stock: China Chip Gets Go Ahead
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
Shares of Nvidia had pushed to record highs, fueled in part by chipmaker Taiwan Semiconductor reporting strong results and raising its full-year outlook.
Nvidia also became the first company to hit a $4 trillion market cap, overtaking tech titans Apple and Microsoft.
Some caution from the chip industry did arrive with chip lithography gear maker ASML delivering an earnings beat while warning of tariffs hurting its outlook.
June Rally
Shares of Nvidia jumped 17% in June, guiding the chipmaker to outpace Microsoft in market capitalization. The valuation race between the two tech titans had been close ever since Nvidia announced its first-quarter results on May 28.
Nvidia recently entered the IBD Leaderboard. It is also a holding on the IBD 50 list of growth stocks.
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In terms of its 12-month price performance, Nvidia has outperformed 90% 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 not currently accumulating 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 as well.
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 hovered above its 21-day moving average on Tuesday with earnings due on Wednesday. It is best to wait for the stock to form a base before it becomes a buy again.
