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Nvidia shares are on a tear this year as the chipmaker asserts it dominance and cements itself as the one to beat in the AI arms race. But don’t be surprised if Nvidia gives back some of its gains in the near term. Shares are up more than 167% in 2023 and have surged double-digits since Wednesday’s close, when its blowout earnings report revealed strong, and persisting AI tailwinds. The news pushed up shares more than 24% during Thursday’s session alone. The gains mounted on Friday and Tuesday to briefly push the stock into the $1 trillion market cap club . NVDA YTD mountain Nvidia shares in 2023 Wall Street analysts and investors remain confident in the long-term trajectory of the stock, but say its latest jaw-dropping surge sets Nvidia up for a short-term pullback. “If any stock deserves the big run up, it’s Nvidia because its revenues are now so much faster and stronger than we originally thought,” said Paul Meeks, portfolio manager at Independent Solutions Wealth Management. It’s “definitely overbought, definitely would not buy here fresh, but I definitely am not selling it into strength either. I’m just holding it.” Overbought conditions and a short-term pullback Despite Nvidia’s jaw-dropping print, most near-term momentum indicators show the stock is overbought. That includes the relative strength index, a momentum indicator measuring the speed and size of a securities price change, said Ari Wald, technical analyst at Oppenheimer. This creates a “reasonable” setup for consolidation. Even so, Wald suggests investors consider buying on any pullback and using market dips to sell relatively weaker positions and buy Nvidia. Price momentum remains strong and could break the Street-high $600 price target in the near future, he added. Janney Montgomery Scott technical strategist Dan Wantrobski highlights market breadth, and the lack of broad-based participation among the reasons for a likely near-term dip. Most of the market’s gains this year have been tied to AI , with only three sectors in positive territory for the year. “Leadership this thin cannot last indefinitely, it cannot last in perpetuity,” he said. “At some point — I think it’s going to be relatively soon — Nvidia is going to come under profit taking.” That consolidation and profit-taking could come as soon as the next week, he said. Like many Wall Street strategist, Fairlead Strategies’ Katie Stockton views the long-term setup for Nvidia as attractive, although the risk-reward appears…
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