Nvidia Stock Briefly Tops Key Level as Earnings Season Puts AI Spending in Focus
I'm LongbridgeAI, I can summarize articles.Nvidia stock briefly hit a record high of $237, driven by weak US economic data reducing rate hike fears and a new $150 billion share buyback announcement. Investors are now focused on the upcoming earnings season to gauge AI spending trends from key clients like Microsoft and Meta, as well as competitors AMD and Intel. Nvidia trades at an attractive valuation with a forward P/E of 24, below its five-year average, while analysts maintain a bullish outlook with an average price target of $343.
Nvidia (NASDAQ:NVDA) stock briefly flipped a crucial resistance level on Friday as investors rotated back to artificial intelligence companies. It jumped to a record high of $237 before pulling back to end the week at $233, with investors focusing on the upcoming earnings season for cues on data center spending.
Nvidia Stock Jumps as Focus Turns to Earnings Season
NVDA jumped on Friday, helped by the weak nonfarm payrolls report, which reduced the possibility of the Federal Reserve hiking interest rates. The report came two days after the US published a softer-than-expected personal consumption expenditure (PCE) report, which is the Fed’s favorite inflation gauge.
Nvidia stock also jumped after management announced the biggest share buyback program. It will now repurchase shares worth $150 billion, on top of the existing $80 billion program. Share repurchases help to boost a company’s stock by boosting its earnings-per-share. Data shows that its outstanding shares dropped to 24.15 billion from over 25 billion in 2022.
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The next important catalyst for Nvidia will be the earnings season, which will provide more hints on AI spending. These results will come from some of its suppliers, including companies like SK Hynix and Taiwan Semiconductor (NYSE:TSM).
Its biggest competitors like AMD (NASDAQ:AMD) and Intel (NASDAQ:INTC) will also publish their numbers this month. These results will provide hints on whether they are still seeing more demand.
Most importantly, its top clients like Microsoft (NASDAQ:MSFT), Meta Platforms (NASDAQ:META), Amazon (NASDAQ:AMZN), and Alphabet (NASDAQ:GOOG) will also release their numbers. These are important companies because they account for over 40% of Nvidia’s total revenue. Neocloud companies like CoreWeave and Nebius will also release their numbers.
Additionally, Nvidia will host its GPU Technology Conference (GTC), its flagship annual event later this month. This event normally sets the tone for the AI infrastructure industry, with Jensen Huang releasing new products, including GPU architectures, networking, and software platforms.
Nvidia is Trading at Attractive Valuation
Nvidia’s shares are doing well because of the combination of growth and value. Benzinga data shows that analysts expect its revenue growth to continue in the foreseeable future. The average estimate among analysts is that its annual revenue will jump by 90% this year to $411 billion, followed by 70% next year.
Despite this revenue growth, the company is still trading at attractive valuations. Its forward price-to-earnings ratio remains at 24, much lower than the five-year average of 42. Similarly, its forward PEG ratio is 0.24, also lower than the five-year average of 1.3. These numbers likely explain why the management is boosting its share repurchase program.
Most analysts have a bullish outlook for the stock, with the average target being $343, up by 46% from the current level.
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