Nvidia Stock Forecast: NVDA trades lower ahead of interest rate announcement
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- Nvidia is trading lower at the start of Wednesday’s session.
- NVDA is more than 13% off its August 24 all-time high.
- The Federal Reserve will make its interest rate decision at 14:00 EST.
- Taiwan Semiconductor announcement still weighing on sector.
Nvidia (NVDA) stock is shedding weight once again on Wednesday despite broad market optimism ahead of the Federal Reserve’s interest rate decision. NVDA stock is trading 0.3% lower in the premarket at $433.89 at the time of writing.
NASDAQ 100 futures on the other hand have edged 0.24% higher early on Wednesday. Dow Jones and S&P 500 futures have advanced slightly more as the market is gearing up for an expected pause from the central bank.
Nvidia stock news: Interest rate pause should aid equity market
The CME Group's FedWatch Tool gives the Fed a 99% chance of pausing rates in the 5.25% to 5.5% range. That would alleviate the market's fears as higher interest rates boost Treasuries and reduce the relative value of equities. Nvidia should be following in the market’s footsteps, but interest rates are not front of mind at the moment. While other competitors like Advanced Micro Devices (AMD) and Intel (INTC) see rising share prices on Wednesday, Nvidia is continuing its downward trend that began following earnings back in late August.
As the leading stock in the artificial intelligence (AI) industry based on the supply of its advanced GPUs, Nvidia has garnered an industry-leading valuation. The stock is valued at 45 times forward GAAP earnings. If those profits fail to materialize, then shareholders are always at risk of a profound sell-off.
Consensus earnings are expected to rise 224% this fiscal year, 48% the following year and 25% the year after that. Likewise, revenue is expected to spike 101% this fiscal year, 43% the following year, and 23% the year after that. A lot is then riding on Nvidia’s commercial performance to make this high valuation sensible.
It didn’t help things then that Nvidia’s primary foundry partner, Taiwan Semiconductor (TSM), announced last Friday that it was delaying the delivery of equipment it had previously ordered from suppliers like ASML Holdings (ASML). Management blamed the delay on worries over demand from its customers, which was quite surprising.
Ever since OpenAI released ChatGPT in late 2022, most semiconductor headlines have mostly concerned themselves with lack of supply. Demand was reported to be unquenchable, and rumors abounded of various companies and nations stockpiling Nvidia’s H100 GPUs.
It is possible demand is only receding for Taiwan Semi’s other customers – such as Apple (AAPL) or Advanced Micro Devices – but Nvidia is certainly the foundry’s most famous client. Placing the blame on demand might also be a bait-and-switch tactic, since Taiwan Semiconductor recently shifted its start date for production at its new Arizona foundries by one year to 2025, blaming that delay on lack of manpower.
In other news, the UK’s Competition & Markets Authority released seven principles for regulating artificial intelligence on Monday. The regulatory authority named Nvidia by name as one of the corporations it would be holding discussions with on the matter.
Nvidia stock forecast
Nvidia has not made a new high since its August 24 earnings spike that immediately sold off. The next rally a week later failed to take, and NVDA has been moving lower ever since. Technically, to end its uptrend that begin this spring, Nvidia stock needs to sink below the August 14 low of $403.11.
Based on the daily chart below, bulls and shareholders alike will hope it stops at the $420 support level that has reinforced price action in several sessions this year. Already trading below the 50-day Simple Moving Average, the 100-day SMA comes next and is currently trading just above $408. Below there is the $400 to $403 demand zone.
On the other hand, a break back above the 50-day SMA will do wonders to re-engage bulls.
NVDA daily chart
