NVIDIA Stock Is Winding Up for A Record Setting Second Half

Semiconductor giant NVIDIA NVDA stock is down (-48%) during the 2022 technology bear market. The leading maker of graphic processor units (GPUs) saw record growth as revenues rose 46.4% in its fiscal Q1 2023. Data center, which includes artificial intelligence (AI), revenues grew a whopping 83% to $3.75 billion hitting a new record as well as Gaming growth of 31% with $3.62 billion in sales.

From the likes of it, the Company is operating on all cylinders despite inflationary pressures, supply chain disruption, and logistics issues. However, NVIDIA lowered its fiscal Q2 2023 guidance as nearly $500 million of shortfall is related to the Russian war and COVID lockdowns in China. From the metaverse, gaming, and cryptocurrency mining to artificial intelligence (AI) and robotics, NVIDIA chips are powering digital transformation and digital innovation forward. The Company has $9.3 billion in cash. The CEO had stated that they are gearing for the largest wave of new products in its history in the second half of the year. The Company also extended its buyback program of up to $15 billion through December 2023. The bar is set low moving forward and any reprieve in the Russian war or China lockdowns will bolster top and bottom line beats. Prudent investors looking for a leading chip maker in future megatrends (gaming, AI, cryptos) can look for opportunistic pullbacks in shares of NVIDIA.

Fiscal Q1 FY 2023 Earnings Release

On May 23, 2022, NVIDIA released its fiscal first-quarter 2023 results for the quarter ending April 2022. The Company reported an earnings-per-share (EPS) profit of $1.36 excluding non-recurring items versus consensus analyst estimates for a profit of $1.29, a $0.07 beat.

Revenues grew 46.4% year-over-year (YoY) to $8.29 billion beating analyst estimates for $8.09 billion. Data center revenues rose 83% YoY to $3.75 billion. Gaming revenues rose 31% YoY to $3.62 billion. Professional Visualization rose 67% to $622 million. Automotive and Robotics fell (-10%) to $138 million.

NVIDIA CEO Jensen Huang commented, "We delivered record results in Data Center and Gaming against the backdrop of a challenging macro environment. The effectiveness of deep learning to automate intelligence is driving companies across industries to adopt NVIDIA for AI computing. Data Center has become our largest platform, even as Gaming achieved a record quarter. We are gearing up for the largest wave of new products in our history with new GPU, CPU, DPU and robotics processors ramping in the second half. Our new chips and systems will greatly advance AI, graphics, Omniverse, self-driving cars and robotics, as well as the many industries these technologies impact." 

Downside Guidance

NVIDIA lowered fiscal Q2 2023 revenue guidance to come in the range of $7.94 billion to $8.26 billion versus $8.44 billion consensus analyst estimates. Roughly $500 million was related to Russian and COVID lockdowns in China. Non-GAAP gross margins are expected between 66.6% to 67.6%.

Conference Call Takeaways

CEO Huang pointed out several factors driving the Gaming industry including the migration of 100 million new gamers in the PC industry. People use their PCs to broadcast and connect with friends and work from home. The need for GeForce PCs has never been stronger. He pointed out that the second half of the year will have more products released than ever before in its history and the dynamics of the Gaming industry is "great" despite Russia or China issues. The Company is perfectly timed to ramp into Gen 5 generation with Hopper.

NVLink has enabled them to mix, and match dies, packages, chips and systems on different types of configurations. New types of data centers are emerging that utilize robotics and automation to run 24/7 with different architectures. He noted that NVIDIA wants to produce intelligence, "AI and data-driven machine learning techniques for writing software and extracting insight from the vast amount of data that companies have is incredibly strategic to all the companies that we know. Because in the final analysis, AI is about automation of intelligence and most companies are about domain-specific intelligence."

NVDA Opportunistic Pullback Levels

Using the rifle charts on the weekly and daily time frames provides a precision view of the price action playing field for NVDA stock. The weekly rifle chart has been in a downtrend after rejecting down off the $198.83 Fibonacci (fib) level.  The weekly 5-period moving average (MA) sits at $158.11 followed by the 15-period MA at $179.38.

The weekly 200-period MA sits near the $122.15 fib. The weekly lower Bollinger Bands (BBs) sit at $97.35. The weekly 50-period sits at $229.77. The weekly market structure low (MSL) buy triggered above $152.22. The daily rifle chart has an inverse pup breakdown attempts with a falling 5-period MA at $152.92 and 15-period MA at $155.63.

The daily stochastic crossed down at the 40-band. While shares are testing the daily 15-period MA, a slip back under the daily 5-period MA will turn the daily stochastic into a mini inverse pup breakdown. The daily lower BBs sit at $139.80. Prudent investors can watch for opportunistic pullback levels at the $146.80 fib, $140.55, $136.45 fib, $132.85 fib, $127.94, $122.15 fib, $117.05 fib, $113.72, $108.85 fib, and the $106.99 fib level. Upside trajectories range from the 181.30 fib level up towards the $218.75 fib level. Investors can watch competitor Applied Micro Devices AMD stock to gauge sentiment.

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