Nvidia stock price analysis: risks and opportunities ahead of earnings

Nvidia stock price has pulled back from its all-time high, costing investors over $300 billion as the market capitalization has dropped from over $5 trillion to the current $4.7 trillion. So, is the stock a good buy ahead of its earnings report?

Nvidia stock price technical analysis

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The daily timeframe chart shows that the NVDA stock price has been in a downtrend in the past few months. It has dropped from the year-to-date high of $212 in October to the current $193.

Nvidia shares have dropped as investors remain concerned about the AI bubbleand its valuation metrics. Most importantly, market participants are waiting for the upcoming earnings, which will be published on November 19th.

A closer look at the daily chart shows that the NVDA stock has remained at the weak, stop & reverse point of the Murrey Math Lines. This is notable as it moved to the extreme overshoot level of this tool last month.

On the positive side, the stock remains above the 50-day and 100-day Exponential Moving Averages (EMA). This is notable as it means that bulls are in control for now.

Therefore, the most likely Nvidia stock price forecast is bullish, with the next point to watch being at $212, the highest point this year. A move above that level will point to more gains, potentially to the psychological level at $250.

On the flip side, a move below the Major S/R pivot point at $175 will invalidate the bullish outlook and point to more downside, potentially to $150.

NVDA stock price chart | Source: TradingView

NVDA stock faces major risks

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Nvidia, the biggest company in the world, has potential risks and opportunities ahead of its earnings report. The first main risk is that of circular investments, where capital is moving between AI companies it has a stake in.

For example, CoreWeave, a major data center operator, is partially owned by Nvidia. It has become one of the biggest buyers of Nvidia products in the past few years.

Nvidia has also revealed plans to invest $100 billion in OpenAI. OpenAI will then spend these funds to buy Nvidia chips.

The other major risk is that the company relies on a handful of hyperscalers for its business. It relies on companies like Microsoft, Google, and Meta Platforms, which are now under pressure from their investors to show results for their data center investments.

A decision by one of these companies to cut AI investments will have a significant impact on its business.

Also, there are signs that the company’s industry is becoming highly competitive, with AMD gaining market share. Chinese companies like Alibaba are also doing well.

Nvidia has major tailwinds ahead

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Nvidia stock price has some major tailwinds. One of them is that there are signs that AI investments are going. A good example of this is Anthropic, which has pledged to invest $50 billion in the US in the near term. Most of these investments will go to Nvidia chips.

The other major tailwind is that investors anticipate its business to continue doing well. Analysts estimate its revenue will come in at $54 billion, up 56% from the same period last year.

Analysts also expect that its annual revenue will be $207 billion, up by 58% from last year. It is expected to make $287 billion next year and cross the $500 billion milestone by 2030.

Additionally, there are signs that Nvidia is an undervalued company despite its nearly $5 trillion market cap. The company has a forward price-to-earnings ratio of 44, much lower than the five-year average of 58. Its non-GAAP multiple is 42, also lower than the five-year average of 46.