• Nvidia could benefit from steady data center demand.
  • NVDA stock is expected to post $1.29 a share on $8.09 billion in revenue.
  • Market sentiment will play a large roll in after-hours reaction.

Nvidia (NVDA) stock is trading up 2.1% at $165 on Wednesday ahead of its quarterly earnings call after the close. The semiconductor behemoth known for its GPUs has beaten earnings expectations for 13 consecutive quarters. Ready to make it 14, the market seems uncertain how much if at all inflation and recent retail jitters could affect Nvidia's results.

Also read: With China in danger of recession, all eyes on Thursday's BABA earnings for clues

Wall Street is expecting adjusted earnings per share (EPS) of $1.29 on revenue of $8.09 billion.

Nvidia Stock News: Data center demand is key to earnings beat

Although anything could happen, our money is on another earnings beat. Semiconductors are in hot demand, and 2021's chip shortage is yet to be sated. With a lack of supply, chip makers overall should find it easy to raise prices as many of the top designers offer products without simple substitutes. Citi analyst Atif Malik wrote to clients, "We hear data center still remains an area of relative strength within semis, as consumer semis PCs and smartphone-related demand continues to come down.” If true, this is quite positive since data centers account for around 40% of Nvidia's sales.

Of course, the Federal Reserve will release minutes on Wednesday that could affect market sentiment positively or negatively, so it is still possible that the largescale shift in investor williness to pay high multiples for growth stocks could outweigh even positive results and guidance.

In step with Snap, the social media platform that saw its star collapse after releasing a pessimistic vision for business prospects the rest of the year, Nvidia announced this past weekend that it had decided to slow down its rate of hiring. Besides Snap, Nvidia joins a host of other tech firms who are bracing for a recession.

Nvidia Stock Forecast: Is a rally on the way?

Yes, I know, the market has been dropping for weeks. The S&P 500 is yet to touch the all holy 3,400 level that many view as the ultimate bottom in this mayhem. What would make me think NVDA stock is revved up for a reversal now?

In short – the infamous RSI divergence. As you can see on the NVDA daily chart, the range lows on April 27 and May 12 connect at a downward angle. A quick glance at the Relative Strength Index (RSI) below, however, tells a different story. Here the two bottoms are drifting upward. This is called divergence. Typically, traders see this take place in the leadup to a reversal.

A rally at this stage, if its has any power, NVDA stock will take aim at $208.90. This is the level that acted as hard support during the first quarter of the year before the recent doom and gloom set in. Additionally, the 9-day moving average is closing ranks with the 20-day moving average. Overtaking the latter would be a second signal that the rally is upon us.

Nvidia daily chart

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