Nvidia Stock Forecast: NVDA reverses above 50-day SMA on July CPI result
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- NVDA stock tracked below the 50-SMA on Wednesday following Biden semiconductor export limits.
- US CPI for July shows core inflation continuing to recede.
- NASDAQ 100 futures rose 1.1% early Thursday on CPI beat.
- Chinese tech giants have at least $9 billion worth of orders for Nvidia’s A800 GPU.
Nvidia (NVDA) stock reversed course and moved above the 50-day Simple Moving Average (SMA) after closing below it on Wednesday for the first time since early January. NVDA stock is trading up 2.2% near $435 a half hour into Thursday's session.
The leading semiconductor designer dropped 4.7% on Wednesday following news that US President Joe Biden has signed an executive order to limit investment by US corporations in specific hi-tech industries.
The July US Consumer Price Index (CPI) came in below expectations on Thursday morning, which largely boosted tech stocks. The NASDAQ Composite jumped 1.6% on the news. Core inflation rose 4.7% YoY, and headline inflation gained 3.2% YoY. Both readings were 10 basis points below consensus.
Nvidia stock news: Biden administration to limit Chinese investment
Wednesday afternoon the Biden administration adopted an executive order that would limit US corporations from investing in the semiconductor, microelectronic, quantum information technology, and artificial intelligence industries of China. The latter’s foreign ministry decried the new stringent regulations.
"This program will seek to prevent foreign countries of concern from exploiting U.S. investment in this narrow set of technologies that are critical to support their development of military, intelligence, surveillance, and cyber-enabled capabilities that risk US national security," the White House said in a written statement.
The Financial Times simultaneously reported that Chinese heavyweights in the consumer internet sector have ordered more than $5 billion worth of Nvidia chips in an attempt to stockpile them ahead of a more restrictive environment. Those tech companies include Alibaba (BABA), Tencent (TCEHY), Baidu (BIDU) and ByteDance – which all have orders for upwards of $1 billion worth of A800 GPUs with delivery timelines in 2023. For 2024, they have at least another $4 billion worth of orders already penciled in.
Nvidia designed the A800 last year in order to circumvent rules from Washington regarding state-of-the-art semiconductor technology headed to China. The A800 has a slower transfer rate than the A100 it is modeled on that is used in data centers to deal with the heavy compute required for training large language models and other generative AI technologies.
On Monday, a Morgan Stanley team released a client note arguing that the AI rally this year is in its “later innings”. Noting that Nvidia and other prominent AI-related stocks have more than tripled their share prices year to date, the team captained by equity strategist Edward Stanley said that this rally had already surpassed other niche bubbles that on average see gains of 150% over a three-year period.
Citi reiterated its Buy rating and $560 price target on NVDA stock on Wednesday following Nvidia’s unveiling of its GH200 Grace-Hopper superchip. The chip platform comes with triple the bandwidth and memory of the most recent generation of chips and is designed to deal with heavier generative AI workloads at data centers.
Nvidia is slated to report second-quarter earnings on August 23. After the company raised its outlook last quarter, Wall Street analysts now expected adjusted earnings per share (EPS) of $2.07 on revenues of $11.06 billion.
Nvidia stock forecast: A break of 50-day SMA speaks volumes
As previously mentioned, NVDA stock closed below the 50-day SMA on Wednesday. It has traded above this moving average since January 9, so that works out to roughly an 8-month uptrend.
Nvidia stock had to consolidate at some point, and there are plenty of support levels nearby that might serve as decent entries for longs. It is now trading right near the $420 price level that served as both resistance (May 30) and support (June and July). The $400 level worked as support on several occasions from May 30 through June 26, and below there comes the demand zone stretching from $373 to $378.
The Moving Average Convergence Divergence (MACD) began its bearish turn lower in late June and it could soon trend below the zero threshold, which would be a much stronger bearish warning for bulls. In mid-July, Nvidia stock ran into stubborn resistance just around $480.
NVDA daily chart
