Nvidia Stock Struggles Before Earnings – Beat or Miss Ahead?
Today after the close we will get the Q3 of 2024 earnings report from Nvidia, and the price action in Nvidia stock shows that there’s fear in markets.
Stock Market Weakness and Trade Concerns Weigh on Big Tech
The U.S. stock market faced strong selling pressure yesterday, with the S&P 500 declining by 0.5% and the NASDAQ dropping over 1.2%. Investor sentiment turned negative following comments about tariffs on Canada and Mexico, adding to market jitters.
However, much of the recent uncertainty stems from Nvidia’s upcoming Q4 earnings announcement, with investors particularly focused on its profit and sales forecasts for 2025. The launch of DeepSeek, a new AI competitor emphasizing efficiency, affordability, and open-source technology, has further intensified concerns.
DeepSeek’s Impact on Nvidia and Market Reactions
Nvidia stock experienced a sharp decline in January following DeepSeek’s debut, triggering a significant drop in prices. However, the company staged a strong bullish recovery in February, with NVDA shares surging past $143 early last week, fully closing the gap left by the DeepSeek-related selloff.
Despite this recovery, the stock reversed course again, falling over 3% yesterday to below $132 due to broader market weakness, extending losses from Friday. The price has now slipped below the 100-day Simple Moving Average (SMA), raising concerns that if Nvidia’s 2025 profit outlook falls short of expectations, further losses could be on the horizon.
AI Demand and China’s Role in Nvidia’s Growth
Despite these concerns, Nvidia’s revenue prospects remain strong, particularly due to rising demand for its H20 chips in China. U.S. export restrictions have led major Chinese firms, including Tencent, Alibaba, and ByteDance, to significantly increase their purchases of Nvidia’s China-exclusive H20 chips.
This trend could support Nvidia’s earnings and revenue forecasts for 2025. Analysts are already anticipating a significant jump in Nvidia’s Q4 2024 revenue, largely driven by the rapid expansion of AI applications across government and corporate sectors.
Looking ahead, major technology firms are expected to ramp up capital expenditures in 2025, with projected spending exceeding $300 billion—more than triple the previous year’s total of $100 billion. If Nvidia’s earnings surpass market expectations, the stock could see a strong rebound, but any disappointment in financial results could extend the recent downturn.
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