Key insights
- Nvidia shares experienced a post-earnings dip, falling 2% on Friday and underperforming the broader market rally. Despite this, options pricing suggests traders anticipate a potential 4% swing next week. Analysts remain largely bullish, with an average price target indicating significant upside, driven by continued AI hardware spending. The stock's historical pattern of post-earnings declines followed by rebounds offers optimism for a future recovery.
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Nvidia shares got left out of this week's market rally despite strong results from the chipmaker. Could next week's performance be better?
Shares of Nvidia (NVDA) fell nearly 2% Friday, making it the weakest performer in the Dow Jones Industrial Average on a day when broader gains drove the index to new highs. The slide left the chipmaker's stock about 9% off its record earlier this month, though a history of dipping in the days following the earnings could help fuel optimism about a rebound.
Current options pricing suggests traders see the shares swinging up to 4% in either direction by the end of next week. A move of that size from Friday's close could see Nvidia shares rise back to about $224, nearing their recent record, or drag them below $207.
Nvidia's stock performance this week could mirror a pattern of falling in the days following the company's earnings report, before turning higher in the weeks and months that follow.
A post-earnings slump would hardly be a new occurrence for Nvidia. The AI giant's stock declined the day after each of its previous three earnings reports, before later reversing the slide to reach new highs. Even with this week's losses, the shares are up 15% from the start of the year, and nearly 65% over the past 12 months as investors have showed renewed enthusiasm for the AI trade.
Analysts at William Blair, who told clients strong results from Nvidia have been "normalized," said they still see gains ahead for Nvidia as big tech companies continue spending heavily on AI hardware and reiterated an "overweight" rating.
While ratings may still be in flux in the wake of Nvidia's latest results, analysts remains overwhelmingly bullish on the company's stock. All but one of the 14 analysts with current ratings tracked by Visible Alpha recommend buying the stock, compared to one neutral rating. Their average price target of $286 would suggest nearly 33% upside from the stock's recent level.
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