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Why Is Nvidia (NVDA) Stock Gaining Today?

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Stocks across the board were in the green on Tuesday morning as trade tensions between the U.S. and China let up a bit, and shares of Nvidia (NVDA - Free Report) opened about 5% higher after the popular high-tech company received praise from key analysts.

The latest development in the ongoing trade spat was a major address from Chinese President Xi Jinping on Tuesday. Xi did not specifically mention the U.S. or President Donald Trump, but he did pledge commitment to economic liberalization and promised foreign companies greater access to China’s budding financial and manufacturing segments.

The 40-minute speech drew a contrast with President Trump’s “America First” rhetoric and framed China as an open global leader focused on maintaining international economic order.

“In a world aspiring for peace and development, the Cold War and zero-sum mentality look even more out of place,” Xi said.

Xi’s pro-trade sentiment was enough to ease some concerns that the U.S. and China were poised to initiate a full-blown, tit-for-tat trade war. U.S. stocks opened higher, with the Dow Jones index surging nearly 1.5% and leading the morning’s gainers. The broader S&P 500 and tech-heavy Nasdaq composite were both up more than 1% in early trading hours.

One of Tuesday’s strongest opens came from Nvidia, which moved higher on the back of bullish analyst sentiment.

On Monday afternoon, Morgan Stanley chip expert Joseph Moore raised his rating on the stock to “Overweight” from “Equal Weight” and reiterated his $258 price target. That call represents a 20% upside to the stock’s most-recent close.

Moore said that his takeaway from Nvidia’s recent GTC conference is that more and more people are opting to use Nvidia’s GPU products for artificial intelligence and machine-learning tasks versus dedicated chips.

“As NVIDIA's footprint continues to expand, it's increasingly clear that all roads lead back to NVIDIA as the most direct beneficiary of trends in machine learning,” Moore wrote in a note. “The real long-term debate, in our opinion, is going to be about graphics vs. dedicated AI architectures… But in meetings with multiple customers at the company's developer conference last week, it continues to be clear that the leaders in machine learning are building their products on NVIDIA silicon, with relatively high switching costs.”

Moore’s note is just one piece of a larger bullish analyst picture for Nvidia. Just last week, Evercore told clients that the stock’s recent selloff created a “tremendous buying opportunity,” reassuring investors that crypto-related concerns were overblown.

NVDA has shed more than 10% over the past month amid market-wide volatility and a steady decline in the cryptocurrency market. Nvidia’s GPUs are frequently used by digital coin miners, and investors have grown concerned that a loss of interest in this space could hurt demand.

But a decline in cryptos likely will not have the negative impact that some feared, and analysts remain optimistic about the company’s growth opportunities. Over the past 90 days, the Zacks Consensus Estimate for Nvidia’s full-year earnings has soared and now calls for EPS growth 28.5%. Total annual revenues are projected to improve by 28.4%.

Nvidia is currently sporting a Zacks Rank #3 (Hold) and an “A” grade for Growth in our Style Scores system.

Want more market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!

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