Nvidia’s bulls stall after $3 trillion market valuation

NVDA stock has an average recommendation of "Strong Buy." The stock price estimate for the next 12 months is $1,127.9

Olumide Adesina•Thursday, June 6, 2024•2 min read

Nvidia stock decline stopped and a strong rebound followed last week

Nvidia Corp. is now the most valuable semiconductor company in the world. It has now achieved the rare feat of being the first computer chip business to reach $3 trillion in market valuation.

The company’s shares in Santa Clara, California have increased by around 147% this year, adding roughly $1.8 trillion due to the explosive demand for its chips, which are used to power artificial intelligence jobs. With a 5.2% gain, the market capitalization reached a record $1,224.40 on Wednesday, surpassing Apple.

Market fundamentals show Nvidia’s next Blackwell GPU hardware, CUDA software platform, and connection to the automotive industry will propel the chip manufacturer into another phase of rapid expansion.

NVDA stock has an average recommendation of “Strong Buy.” The stock price estimate for the next 12 months is $1,127.9, down -7.88% from the current price.

Even though Nvidia has been on a solid upward trend, the most recent rise was accompanied by a diminishing trading volume, suggesting that momentum may be waning ahead of the much-awaited 10-for-1 split of the stock, which happens after Friday’s closing bell.

Furthermore, the relative strength indicator (RSI) has reached a lower high despite the stock reaching highs. This indicates a bearish divergence, a technical event that signals a possible reversal.

Nvidia shares have been trending substantially higher since October 2022, when they bottomed out just below the 200-week moving average (MA). Retracements from February 2023 have needed more selling pressure to approach the 50-week MA.

The stock experienced a four-week correction of about 20% through the first half of April following an amazing run of eleven consecutive weekly green candlestick bars between January and March. However, the stock resumed its uptrend as buyers took advantage of the dip in the run-up to the company’s quarterly results last month.

This week, Nvidia’s star continued to rise because of its commanding market dominance of the premium accelerators used in AI training. Rivals ranging from Advanced Micro Devices Inc. to Intel are vying with Nvidia for control over an ecosystem of software, hardware, and solutions. “It’s almost like Nvidia versus the world.

Unknown to many, however, is the truth that Nvidia’s success is dependent on the hundreds of Taiwan-based businesses working together to enable artificial intelligence.

Those who see past Nvidia’s wake can see patterns that could eventually dictate the global course of AI evolution. This year, Microsoft Corp. software was widely used in presentations and exhibition booths, “AI PCs” proliferated over expansive show floors, previously unknown Taiwanese brands rose to fame, and many IT titans studiously avoided discussing politics, China, or sanctions.

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ABOUT THE AUTHOR See More

Olumide Adesina

Financial Market Writer

Olumide Adesina is a French-born Nigerian financial writer. He tracks the financial markets with over 15 years of working experience in investment trading.