Nvidia Stock Forecast: NVDA reverses opening-bell rally
- Nvidia has purchased a chunk of the Arm Holdings IPO.
- The market is advancing early due to excitement over Arm’s first day of trading.
- NVDA sells off after initial rally on Thursday open.
- NVDA stock is having trouble holding onto daily rallies.
Nvidia (NVDA) stock has sold off after gaining 1.1% at Thursday’s open. The stock ran up to a session high of $459.87, on general excitement over the Arm Holdings (ARM) Initial Public Offering (IPO), but 45 minutes in has lost all its gains. The NASDAQ Composite is still 0.1% higher.
Nvidia is buying a stake in Arm Holdings, said to be alongside a number of tech heavyweights, including Alphabet (GOOGL), Intel (INTC) and Advanced Micro Devices (AMD). The deal was priced on Wednesday and distributed to institutional investors but begins trading on Thursday, although not at the start of the session. It is uncertain exactly how much of the IPO Nvidia purchased, but fellow commercial partner Taiwan Semiconductor (TSM) bought $100 million alone.
Nvidia stock news: The one that got away
The nearly dozen major tech companies have agreed to purchase about $735 million worth of the $4.87 billion Arm Holdings IPO. Arm, a designer and licenser of specialized computer chips used especially in cell phones, has issued 95.5 million shares at a price of $51 per share. This gives the overall company a market cap of about $54 billion.
The reason the market is excited about Arm’s IPO is that the IPO market has been rather tepid over the past 18 months following the covid boom. So much so that Arm Holdings’ offering was oversubscribed by about 10 times, according to Bloomberg. Investment banks initially thought they needed two days to sell all the shares but instead finished handing them out on the first day.
The Arm IPO is significant for Nvidia CEO Jensen Huang because it is the one that got away. Nvidia announced its intention to buy Arm from its majority owner, Japan’s Softbank, exactly three years ago to the month for $40 billion. Eventually, Jensen gave up in 2022 as it appeared that regulators in multiple countries were not accepting of the move. Many competitors were worried that it would give Nvidia insurmountable power in the advanced semiconductor realm.
Arm’s revenue and earnings have stagnated over the past year, but its estimated market share has risen from 42% to 49% since the start of 2021.
Bank of America Global AI Conference hosted Nvidia’s General Manager and Vice President of Accelerated Computing, Ian Buck, on Monday. When peppered with questions from Bank of America analyst Vivek Arya about the heavy costs associated with large language models (LLMs), Buck responded that the problem was already easing.
“One thing that is – NVIDIA is spending and investing billions in R&D to optimize for generative AI for training and inference scale,” Buck said. “And with every generation of our GPU, with every generation of our interconnect and InfiniBand and CX networking technology, with every innovation of NVLink, those things […] increase performance dramatically and also bring down the cost of training.”
Semiconductor stocks FAQs
A semiconductor is a term for various types of computer chips. Officially called semiconductor devices, these computer chips rely on semiconductor materials like silicon and gallium arsenide to process the electrical current that produces the modern world of computing. They come in many shapes, sizes, enhancements and configurations such as diodes, transistors and integrated circuits to more complicated applications like DRAM memory, simple processors and even GPUs.
First, there are the pure chip designers, such as Nvidia, AMD, Broadcom and Qualcomm. These companies use sophisticated software to design and test chips. Second, there are the equipment manufacturers that provide the machines necessary to build computer chips. These include ASML and Lam Research. Then, there are foundries that manufacture the chips. These include Taiwan Semiconductor and GlobalFoundries. Last of all are the integrated device manufacturers who design their own chips and additionally manufacture themselves. These include Samsung and Intel.
It is the observation that the number of transistors in an integrated circuit doubles every two years. The “law” is named after Gordon Moore, who founded Fairchild Semiconductor and later Intel. The doubling is possible due to the shrinking size of process nodes or parts in the computer chip. In 1971 the advanced commercial manufacturing had reached 10 microns in width. In 1987 semiconductor technology had advanced to 800 nanometers in width. By 1999, this process had moved to 180 nanometers. By 2007, the size had dropped to 32 nanometers, and this fell all the way to 3 nanometers in 2022, which is close to the size of human DNA.
In 2022, the global semiconductor industry had revenues just under $600 billion. In total, the industry shipped 1.15 trillion semiconductor units in 2021. The leading nations involved in the semiconductor supply chain are Taiwan, the United States, China, the Netherlands, South Korea, Japan and Israel.
Nvidia stock forecast
Nvidia stock is trading below both the 9-day and 21-day Simple Moving Averages (SMA), which gives it the profile of a downtrend rotation. Any major sell-off should push shares back to the $420 or $400 level at which the stock has discovered support on a number of occasions.
The Moving Average Convergence Divergence (MACD) indicator has rolled over in bearish fashion and could foreshadow further downward pressure. To change the forecast, bulls need to push NVDA stock above the 9-day SMA at $467.58.
NVDA daily chart
The weekly chart below still shows plenty of room on the upside if you follow the long-term top trendline going back to 2020. The Fibonacci Extension indicator coincides with that idea in that NVDA could run up to $620 at some point in the medium term at the 161.8% Fibo level.
NVDA weekly chart