Regular readers may recall that I last addressed Nvidia (NVDA) back on February 23rd in response to earnings. The stock opened in the $230's that day, and I made the disciplined sale that I said I would as my target coming into earnings had been $216. I placed a $270 target on the balance of my long position at that time in order to get out of the stock's way and wrote to you that I'd be back when the charts told me something.
Well, the stock has really gone mostly sideways since then and I am back to update my view.
Interesting
Readers may also recall that Nvidia reported fourth quarter results that modestly beat expectations and that the stock popped largely on CEO Jensen Huang's focus on the coming era of artificial intelligence and his firm's role in that, more so than what had been accomplished in the recent past.
That brings me to Monday. Microsoft (MSFT) , which is another Sarge name, revealed a new virtual machine using Nvidia's H100 Tensor Core GPUs as its guts/brains. These machines will be able to permit customers to create infrastructure that can scale to size for any artificial intelligence task, given that enough training large language models and GPUs are connected. This machine, known now as the ND H100 v5 VM, will make use of anywhere between eight and literally thousands of Nvidia H100 GPUs in order to get the work done.
Then I saw other news. The US Army is looking at adding $77.5M to continue developing its IVAS (Integrated Visual Augmentation System) with Microsoft on top of an already committed $91.3M for procurement if successful. These are futuristic goggles that post information on a screen visible only to the infantry soldier of tomorrow, while also incorporating such features as night vision.
These are futuristic goggles that post information on a screen visible only to the infantry soldier of tomorrow, while also incorporating such features as night vision. I don't know who for sure is providing the GPUs for these futuristic goggles, but I can not really imagine that Microsoft is doing this or will be successful relying upon anyone other than Nvidia for the necessary chips.
As an investor, this is interesting. As an infantryman, I used to pride myself on becoming part of the environment and being as invisible as possible using only my wits and whatever I could find or cover myself with. That side of me weeps.
The Charts
Readers will see that the stock has developed a tight basing pattern after that gap up opening (that remains unfilled) on February 23rd. That's almost a month of going sideways, but sideways while most of the marketplace has been selling off around NVDA and some of the other semis.
Readers will see that the Pitchfork model that we drew up for you last month remains intact. The central trendline has not really been a factor, but the daily MACD (Moving Average Convergence Divergence) is showing signs of rolling over, while RSI (Relative Strength Index) softens just a bit. Let's zoom in...
Readers will see that NVDA tested its 21 day EMA (exponential moving average) last night as it did on February 22nd. This is a level in dollar terms, that the stock tested in early March. NVDA passed both of those tests. What's not in the stock's favor? It trades at 51 times forward looking earnings and that unfilled gap still calls out to the stock.
Our basing pattern has a lid. That's our pivot. The stock has support that is being tested. Should that spot crack, then I think we probably see the gap fill so we know how far any selloff likely goes from a technical perspective.
Nvidia
- Target Price: $280 (up from $270)
- Pivot: 244
- Add: down to 21 day EMA ($226)
- Panic: break of Monday low ($222)
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