NVIDIA’s share price gains before Q2 update
NVIDIA’s share price skyrocketed in 2021 because of the lockdowns as there was a surge in demand for items that require chips. Everyday goods like smart phones, dishwashers, vehicles, and gaming devices all require chips, hence the popularity of NVIDIA. Prior to the coronavirus spreading to Western economies, NVIDIA’s share price was trading in the region of $70.00, it dropped below $46.00 mark as the stock markets tanked in mid-March 2020, but then it went on a powerful uptrend. By November 2021, the NVIDIA share price had cleared $346.00 – setting a new all-time high. The stock peaked only one-month before the S&P 500 hit its new all-time high, so its rally was largely in line with market trends.
The lockdowns played havoc with logistics and impacted firms like NVIDIA. Worries about inflation and the prospect of higher interest rates hung over the company too. The share price went through a sell off from November 2021 until early July 2022, where it traded closed to $140.00, which equates to a drop of roughly 60% in that timeframe. Since early July, the stock has been broadly moving higher, although it came under a little pressure at the end of last week due to the fall in the wider market.
NVIDIA revealed good first-quarter results in May, but the outlook was a little on the weak side and detracted from the numbers. EPS was $1.36 and that easily topped the $1.29 forecast. Revenue was $8.29 billion, slightly ahead of the $8.11 billion estimate. Looking ahead to the second quarter, the firm anticipated revenue of $8.1 billion, but that fell short of the $8.54 billion that equity analysts were expecting. Rising costs is a common complaint and NVIDIA said that operating expenses jumped by more than 35% on the year. The group announced that lockdowns in China and the Russian invasion of Ukraine would knock $500 million off revenue in the three-month period. Jensen Huang, the CEO, cautioned about a “challenging macroeconomic environment”. On a positive note, the supply constraints that are hanging over the chipmaking sector are easing. Also, the company is seeing high demand for graphic processors. Cloud computing is a growing industry, and NVIDIA’s data centre business registered an 83% jump in annual revenue. While the core gaming division only saw a rise in revenue of $31%.
NVIDIA will publish its second quarter numbers on Wednesday 24 August.
Even though NVIDIA’s share price has cooled in recent sessions, it is still up 27% from the 14-month low that was registered in early July. While the stock holds above the $172.00 mark, it is possible the medium-term uptrend will continue. A rally from here could see it target $200.00, and if that level is cleared, it might bring the $220.00 region into play. A fall back below $172.00 could put $160.00 on the radar, and if that area is breached, it could retest $141.00/$140.00.
