NVIDIA Corporation (NASDAQ:NVDA) stock has seen a sizeable correction since hitting new all-time highs recently. Should you buy in?
NVIDIA Corporation (NASDAQ:NVDA) stock is still one of the best-performing stocks in the S&P 500 (INDEX:SPAL) index, with over 620% gains over the last two years. However, NVIDIA stock is now down by close to 9% from the all-time highs they made last week. We believe NVIDIA stock has still massive upside left. Given the current situation, NVDA stock does look like an enticing opportunity, but should you buy in right now? For those who have been on the lookout for an opportunity to buy into the stock, is this the best time to accumulate NVIDIA shares? Let's take a closer look.
This could be a buying opportunity to enter NVIDIA stock.
NVIDIA stock lost nearly 4.5% in the last trading session, the unveiling of new chips by Intel (NASDAQ:INTC) is being cited as the primary reason behind this fall. Intel's claims of its new i7-8700K chip as the company’s "best gaming desktop processor ever" which is proclaimed to have up to 25% better frame-rate for PC gaming versus previous models. This seems to have not gone well with the investor sentiment. While the stock could fall further in the near term, it looks like a pretty good investment option in the long term. However, the downside risk from here could be limited. For investors considering an entry into NVIDIA stock and want just that additional sense of safety, it's handy to look at the NVDA technical chart to be a little bit more confident that you're not going against the momentum.
A look at the NVIDIA technical chart gives us some key insights. NVDA stock, yesterday made a bearish crossover with its 20-day simple moving average (SMA). Further, the NVIDIA stock technical chart is poised to make a bearish Moving Average Convergence Divergence (MACD) crossover. A bearish MACD crossover occurs when the MACD falls below the signal line. However, as stated earlier in the post the downside risk from here could be limited. The stock enjoys a strong support at its 50-day SMA which presently stands at 168, just 1.75% below the last close. NVIDIA shares have bounced back multiple times upon testing the 50-day SMA since the share price went past it in May. Investors should closely watch out this support level in the next few trading sessions.
NVIDIA is boosting its credentials as the best Artificial Intelligence play.
The Jensen Huang led company has many growth opportunities before it, but one important growth area which has caught everyone's eye is Artificial Intelligence (AI). Recently, Evercore ISI analyst CJ Muse gave the Wall Street's most bullish price target of $250 on NVIDIA based on its AI credentials. The GPU maker's AI segment has been its fastest growing and second largest segment. The segment had reported 175% YoY growth in revenues, from $151 million last year to $416 million in the last quarter. Now, it has added another feather in its AI cap. The company has announced its partnership with Chinese giants Alibaba (NYSE:BABA) and Huawei for its Metropolis AI smart cities platform.
This again gives NVIDIA a head start in the rapidly growing smart cities market which is expected to become a whopping $3.5 trillion in size by 2026. And, out of this massive smart city market, the smart security segment is to see a massive investment in the next decade. NVIDIA's Metropolis AI system is a great step in that direction which can assist with everything from law enforcement to urban planning. Further, the global AI chips market is expected to grow at a CAGR of 54.25% during the period 2017-2021. All this really bodes well for NVIDIA's AI credentials.
Playing NVIDIA stock from here.
Those who have been looking for an opportunity to enter the stock would do well to wait for the stock to settle down and use this opportunity to buy NVIDIA shares. Based on technical setup, the downside risk from here seems to be limited. Investors should remember that NVIDIA stock is still a solid long-term growth play with its growth deeply intertwined with multiple rapidly growing markets like deep learning, artificial intelligence, self-driving cars and growing popularity of e-sports. Hence, the Jensen Huang led NVIDIA growth story is as strong as ever as it is backed by fundamentals not just expectations of growth. Not only AI the company's data center business is also in hyper-growth mode which has tripled in size over the last year. Bank of America Merrill Lynch analyst Vivek Arya estimates that this segment would more than double its size by fiscal 2020 totaling nearly $4 billion in revenues. Overall, this might be a good time to buy into NVDA stock with a long-term perspective. However, investors are advised to monitor the charts closely before making a move.
Looking for fundamentally strong tech stocks like NVIDIA? Check out Amigobulls' top stock picks from the tech sector, which have beaten the NASDAQ by over 141%. Interested in automotive stock? Then, we also have our top picks from the auto sector, which have beaten the S&P 500 by over 262%. If you're a trader though, you should check out our daily trading ideas section for daily, free updates on the latest crossovers and other popular technical signals.