Nvidia edged lower on Thursday after a three-day losing streak landed the stock at a key level. Shares have been falling after the release of the artificial intelligence chip behemoth's second-quarter report last week.
Earnings and sales for the period topped Wall Street's expectations but Nvidia forecast just a slightly higher current-quarter revenue outlook. Is Nvidia stock a buy or sell now?
Second-quarter earnings of $1.05 per share topped estimates of $1.01 per share. Sales of $46.74 billion beat views of $46.05 billion. The company reported zero sales from its China H20 chip and did not include H20 sales to China in its fiscal third-quarter revenue outlook of $54 billion.
Wall Street was expecting $53.43 billion. The company also announced a $60 billion buyback.
In May, the company took a $4.5 billion charge in its first quarter and warned of an $8 billion hit to sales for the second quarter, Reuters and others reported.
Meanwhile, China e-commerce behemoth Alibaba has developed a new artificial intelligence chip that can carry out several in-house tasks, The Wall Street Journal and others reported.
Though the chip is more versatile than earlier versions Alibaba has made, it is still far less capable than Nvidia's advanced chips.
Shares of Nvidia fell below their 50-day moving average on Tuesday and tested that level on Wednesday and Thursday. A break below that level could lead to weaker technical action.
Analysts Raise Their Price Targets, Remain Cautious On China
Ahead of Nvidia's report, William Blair analyst Sebastien Naji gave an outperform rating with a price target of $205 for the stock, Barron's reported. The analyst expected zero revenue from China for the second quarter, but had anticipated China would boost Nvidia's outlook.
Susquehanna analyst Christopher Rolland raised his price target for Nvidia to $210 from $180 while maintaining a positive rating. However, in his earnings preview note, the analyst was cautious about Nvidia's revenue from its H20 chips.
The Information last week 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.
Chief Executive Jensen Huang said the chips do not have such capabilities. Separately, the artificial intelligence chip giant may also be working on a new chip for China that may be more powerful than the H20, Reuters reported.
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 touched an all-time high of 184.48 in August 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 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.
In July, Nvidia became the first company to hit a $4 trillion market cap, overtaking tech titans Apple and Microsoft.
Discover Top Growth Stocks With IBD Leaderboard
In terms of its 12-month price performance, Nvidia has outperformed 89% 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 D-, 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 98.
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 has been hovering at its 50-day moving average for three days. It is best to wait for the stock to form a base before it becomes a buy again.
