Nvidia Stock Could Be Swept Away On Q3 Earnings As Technical Storm Casts Shadow On Semiconductor Names

Caution seems to be the theme ahead of NVIDIA Corp's NVDA third-quarter report. 

What To Know: Nvidia is set to announce its third-quarter financial results after the market close on Wednesday. The company is expected to report earnings of 69 cents per share on quarterly revenue of $5.77 billion. 

At the end of the second quarter, the chip company issued weak guidance as a result of continued supply-chain challenges. Nvidia noted that its gaming and professional visualization segments were expected to decline sequentially. However, data center and automotive were expected to remain strong.

Despite trading down to two-year lows last month, Nvidia shares have rebounded sharply in recent weeks, trending higher into earnings. But that might not be a good sign for the chip giant, according to Ritholtz Wealth Management's Josh Brown.

Brown's Take: He added to his Nvidia position last month and plans to hold the name long-term, but the sharp recovery over the last few weeks sets the stock up for a pullback on earnings, he said. 

"I would not be going into the earnings all bulled up," Brown said. 

"I think we are getting to the place where you want to take profits ... this would not be the place where I really get excited."

He highlighted the technical setup in the broader VanEck Semiconductor ETF SMH. 

"This group had a very similar rally in July into the middle of August, topped out right at that falling 200-day moving average. Now we're challenging that same 200-day moving average once again," Brown said. 

Unless there is a massive break above the 200-day moving average on the SMH, the semiconductor names look to be headed lower, he said. 

"And these companies all year have not been good to hold through earnings," Brown added.

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Bonus Take: Douglas C. Lane & Associates' Sarat Sethi chimed in on the conversation, noting that he expects Nvidia to cut guidance this week. 

"Every company that they sell into has called for a slowdown, so they're going to say something," Sethi said.

If the stock sells off on the report, Sethi believes it will be a buying opportunity for long-term investors. 

NVDA Price Action: Nvidia shares are down more than 43% since the start of the year.

The stock was up 2.50% at $167.03 Wednesday afternoon, according to Benzinga Pro.

Photo: courtesy of Nvidia.