Nvidia Stock Forecast: NVDA stock weakens despite sharing in Arm IPO bonanza


  • NVDA sells off after initial rally on Thursday open.
  • Nvidia has purchased a chunk of the Arm Holdings IPO. 
  • The IPO saw traders cheer as Arm shares opened over 10% higher. 

Nvidia (NVDA) stock has sold off after gaining 1.1% after Thursday's open. The stock ran up to a session high of $459.87, on general excitement over the Arm Holdings (ARM) Initial Public Offering (IPO), but after only 45 minutes of trading lost all its gains. The NASDAQ Composite is trading higher as the Arm IPO lifts off in spectacular fashion. 

Nvidia bought a stake in Arm Holdings, alongside a number of tech heavyweights, including Alphabet (GOOGL), Intel (INTC) and Advanced Micro Devices (AMD). The deal was priced on Wednesday and distributed to institutional investors. This does not seem to be helping NVDA on Thursday, however. 

At the much-anticpated IPO, ARM stock opened at $56.1, well above the $51 offer price, before going on to rise to $60, according to Reuters. It is uncertain exactly how much of the IPO Nvidia purchased, but fellow commercial partner Taiwan Semiconductor (TSM) bought $100 million alone.

Nvidia stock news: The one that got away

Nearly a dozen major tech companies have agreed to purchase about $735 million worth of the $4.87 billion Arm Holdings IPO. Arm, a designer and licenser of specialized computer chips used especially in cell phones, issued 95.5 million shares at a price of $51 per share at its debut on Thursday. This gives the overall company a starting market cap of about $54 billion.

The reason the market was so excited about Arm’s IPO is that the IPO market has been rather tepid over the past 18 months following the covid boom. So much so that Arm Holdings’ offering was oversubscribed by about 10 times, according to Bloomberg. Investment banks initially thought they needed two days to sell all the shares but instead finished handing them out on the first day. 

The Arm IPO is significant for Nvidia CEO Jensen Huang because it is said to be 'the one that got away'. Nvidia announced its intention to buy Arm from its majority owner, Japan’s Softbank, exactly three years ago to the month, for $40 billion. Eventually, Jensen gave up his takeover bid in 2022 as it appeared that regulators in multiple countries disproved of the move. Many competitors were worried that it would give Nvidia insurmountable power in the advanced semiconductor realm.

Arm’s revenue and earnings have stagnated over the past year, but its estimated market share has risen from 42% to 49% since the start of 2021. 

Bank of America Global AI Conference hosted Nvidia’s General Manager and Vice President of Accelerated Computing, Ian Buck, on Monday. When peppered with questions from Bank of America analyst Vivek Arya about the heavy costs associated with large language models (LLMs), Buck responded that the problem was already easing.

“One thing that is – NVIDIA is spending and investing billions in R&D to optimize for generative AI for training and inference scale,” Buck said. “And with every generation of our GPU, with every generation of our interconnect and InfiniBand and CX networking technology, with every innovation of NVLink, those things [...] increase performance dramatically and also bring down the cost of training.”

 

Nvidia FAQs

What is Nvidia known for?

Nvidia is the leading fabless designer of graphics processing units or GPUs. These sophisticated devices allow computers to better process graphics for display interfaces by accelerating computer memory and RAM. This is especially true in the world of video games, where Nvidia graphics cards became a mainstay of the industry. Additionally, Nvidia is well-known as the creator of its CUDA API that allows developers to create software for a number of industries using its parallel computing platform. Nvidia chips are leading products in the data center, supercomputing and artificial intelligence industries. The company is also viewed as one of the inventors of the system-on-a-chip design.

What is the history of Nvidia?

Current CEO Jensen Huang founded Nvidia with Chris Malachowsky and Curtis Priem in 1993. All three founders were semiconductor engineers, who had previously worked at AMD, Sun Microsystems, IBM and Hewlett-Packard. The team set out to build more proficient GPUs than currently existed in the market and largely succeeded by late 1990s. The company was founded with $40,000 but secured $20 million in funding from Sequoia Capital venture fund early on. Nvidia went public in 1999 under the ticker NVDA. Nvidia became a leading designer of chips to the data center, PC, automotive and mobile markets through its close relationship with Taiwan Semiconductor.

What is Nvidia’s relationship to artificial intelligence?

In 2022, Nvidia released its ninth-generation data center GPU called the H100. This GPU is specifically designed with the needs of artificial intelligence applications in mind. For instance, OpenAI’s ChatGPT and GPT-4 large language models (LLMs) rely on the H100’s high efficiency in parallel processing to execute a high number of commands quickly. The chip is said to speed up networks by six times Nvidia’s previous A100 chip and is based on the new Hopper architecture. The H100 chip contains 80 billion transistors. Nvidia’s market cap reached $1 trillion in May 2023 largely on the promise of its H100 chip becoming the “picks and shovels” of the coming AI revolution.

Why does Jensen Huang have a cult following?

Long-time CEO Jense Huang has a cult following in Silicon Valley and on Wall Street due to his strict loyalty and determination to build Nvidia into one of the world’s leading companies. Nvidia neary fell apart on several occasions, but each time Huang bet everything on a new technology that turned out to be the ticket to the company’s success. Huang is seen as a visionary in Silicon Valley, and his company is at the forefront of most major breakthroughs in computer processing. Huang is known for his enthusiastic keynote addresses at annual Nvidia GTC conferences, as well as his love of black leather jackets and Denny’s, the fast food chain where the company was founded.

 

Nvidia stock forecast

Nvidia stock is trading below both the 9-day and 21-day Simple Moving Averages (SMA), which gives it the profile of a downtrend rotation. Any major sell-off should push shares back to the $420 or $400 level at which the stock has discovered support on a number of occasions.

The Moving Average Convergence Divergence (MACD) indicator has rolled over in bearish fashion and could foreshadow further downward pressure. To change the forecast, bulls need to push NVDA stock above the 9-day SMA at $467.58.

NVDA daily chart
 

The weekly chart below still shows plenty of room on the upside if you follow the long-term top trendline going back to 2020. The Fibonacci Extension indicator coincides with that idea in that NVDA could run up to $620 at some point in the medium term at the 161.8% Fibo level. 

NVDA weekly chart


 

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