By Nigam Arora & Dr. Natasha Arora
Signal(s) to enter, add, reduce, exit, hold or change.
Chart
Please click here for a chart of Nvidia stock (NVDA).
- The chart shows when Nvidia Q1 earnings were last released.
- The gap up shown on the chart added about $184B in market cap. This was the third largest market cap gain in one day in U.S. stock market history.
- Nvidia earnings accelerated the AI frenzy rally.
- The chart shows that there was a 262% gain in the Nvidia position if it was bought in the Arora buy zone shown on the chart.
- The chart shows the stock fell after the extraordinary earnings last quarter. The stock fell because it is over-owned.
The Starting Point
The starting point when analyzing NVDA has to be the extraordinary Q1 earnings. At market close before Q1 earnings release, NVDA stock was trading about $305. In Q1 earnings, Nvidia guided $11B vs. $7B consensus. NVDA stock rocketed to $395. The following day, NVDA stock opened around $385 and closed that day around $379.
Over-Owned
The level of excitement about NVDA after Q1 earnings resulted in NVDA stock being over-owned.
Over-owned means anybody who is going to buy has bought, short sellers who are going to cover have already covered, and market makers who are going to hedge by buying a stock have already hedged.
Going into Q2 earnings, NVDA stock was over-owned.
Q2 Earnings
Nvidia reported revenues of $13.5B for Q2. For the current quarter, Nvidia is guiding revenues of $16B.
Nvidia reported Q2 data center revenues of $10.32B, up 141% from Q1.
Nvidia is authorizing an additional $25B in share buyback.
Best AI Stock
NVDA is still the best AI stock.
We were previously projecting $18B in revenue per quarter in 2025, but now we can see revenues going to $20B.
Valuation
In 2026, it is conceivable the NVDA earns $21 per share. At a PE of 36, that would translate to $756. A PE of 36, although very expensive in absolute terms, relative to the growth rate, is a fair PE.
Risks
There is no free lunch. There are many risks to NVDA including new competition.
Zones
To learn about the Good Way and the Best Way, read the Getting a Running Start Guide.
For those following the Good Way, the Buy Now rating is *** (To see the locked content, please take a 30 day free trial).
For those following the Best Way, the buy zone is ***. You need to be patient and wait for a pullback into the buy zone. On a pullback into the buy zone consider scaling in. To learn about buy zones and scaling in, read Trade Management Guidelines. The Trade Management Guidelines are billionaire and hedge fund techniques that all prudent investors should learn and use.
The maximum recommended quantity is ***.
The very long term target zone is $740 – $760.
Trade Around Position
There may be an opportunity for a Trade Around Position. Stay tuned to the Real Time Feed.
What To Do Now
Those in the position may consider continuing to hold.
Those not in the position may consider following the parameters given above.
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Nigam Arora
Nigam Arora is known for his accurate stock market calls. Nigam is a distinguished master of the macro. He is a popular columnist with over 100 million page views, an engineer, and nuclear physicist by background. Nigam has founded two Inc. 500 fastest growing companies and has been involved in over 50 entrepreneurial ventures. He is the developer of Theory ZYX of Successful Change Management and is the author of the book on Theory ZYX, as well as the developer of the ZYX Change Method for Investing.
Dr. Natasha Arora
Dr. Natasha Arora has significant expertise in investment analysis especially biotech, healthcare, and technology. Natasha is a graduate of Harvard Medical School followed by a postdoc at MIT. She has published several peer reviewed research papers in top science journals.
