Friday, May 17, 2024
HomeTechThe Analyst Who Nailed Nvidia's Rally Delivers a Reality Check

The Analyst Who Nailed Nvidia’s Rally Delivers a Reality Check

Nvidia (NVDA) has been Wall Street’s darling, nearly tripling this year and soaring by 57% since March. However, the analyst who predicted this uptrend has a new price target that could leave Nvidia enthusiasts scratching their heads. Let’s dig in.

AI Boom Fuels Nvidia’s Surge

Thanks to the launch of ChatGPT and other AI initiatives, companies are diving headfirst into artificial intelligence. This has ignited a mad dash for specialized hardware, and guess who’s been serving it up hot and fresh? Yep, Nvidia.

The tech giant’s H100 graphics-processing unit, with a whopping price tag of $40,000 each, has become the golden goose. And here’s the kicker: manufacturing each of these units costs Nvidia a mere $3,320. Talk about mouth-watering margins!

Given this backdrop, it was no surprise when CEO Jensen Huang boosted the company’s Q2 sales forecast from a Wall Street estimate of $7 billion to an astronomical $11 billion. Nvidia didn’t just meet this ambitious target; it smashed it with a reported $13 billion in sales. For Q3, the company is eyeing a jaw-dropping $16 billion in revenue, steamrolling past analysts’ expectations of $12.4 billion.

A Puzzling New Price Target

But even with the AI windfall, Bruce Kamich, the analyst who astutely predicted Nvidia’s rally, has updated his analysis and it’s not the music Nvidia bulls want to dance to.

Kamich, who boasts over 50 years of experience analyzing price charts, has warned investors that downside risk has increased for Nvidia. Based on his daily and weekly point-and-figure charts, Kamich has set a new downside target of $401 to $397. Given that Nvidia’s stock is currently cruising above $434, this could spell turbulence.

Technical Signals Raise Eyebrows

Kamich flagged a couple of warning signs. First, he cited the stagnant on-balance volume, indicating more active selling than buying over the last four months. Second, he mentioned the weakening momentum shown by the moving-average convergence divergence oscillator since mid-June. All these are red flags, and they could be telling us something. Maybe Nvidia’s meteoric rise is due for a cooldown.

What Should Investors Do?

Kamich suggests that investors might want to consider safeguarding their gains. Whether it’s by taking profits or setting up sell-stops, now might be the time to lock in your wins, especially if you’ve been riding the Nvidia wave from lower levels.

Wrapping It Up

Nvidia may be the star quarterback in the AI-driven economy, but that doesn’t mean it’s invincible to market forces. The takeaway here is caution: If you’ve bet big on Nvidia, this might be a good time to re-evaluate and potentially hedge your bets.

After all, the only thing more exhilarating than a stock’s meteoric rise is making sure you lock in those gains before gravity kicks in.