NVIDIA Corporation’s (NASDAQ: NVDA) scorching rally stalled Tuesday as investors questioned if the chip designer’s quarterly results would support its high valuation. The stock plummeted 4.35% to $694.52 ahead of quarterly results.
Nvidia, a key player in the artificial intelligence (AI) sector, has seen its stock surge by over 40% this year, surpassing Alphabet (NASDAQ: GOOG) to become the third most valuable company in the U.S., trailing only behind Microsoft (NASDAQ: MSFT) and Apple (NASDAQ: AAPL).
As of Friday, NVIDIA boasted a market capitalization of $1.79 trillion, solidifying its position as a market leader in the tech industry. However, concerns loom over whether the company can deliver robust guidance to sustain its upward trajectory.
Frank Lee, head of technology research at HSBC, said,
“The market is maybe a little bit hesitant whether they (Nvidia) can deliver a strong enough guidance to reinvigorate the market even higher.”
Nvidia will report its quarterly results on February 21. Analysts anticipate earnings of $4.56 per share, with revenue expected to rise from $6.05 billion to $20.378 billion year-over-year, according to ReutersLSEG estimates.
Despite its remarkable performance this year, there are fears that if NVIDIA fails to surpass expectations, its stock may face increased vulnerability.
Dennis Dick, a trader at Triple D Trading, emphasized,
“You can’t come out and simply meet or slightly beat for the stock to go higher, Nvidia’s going to need to blow it away.”
Options for NVIDIA (NASDAQ: NVDA) are currently pricing a swing of about 11% in either direction following the announcement of the results, as per data from options analytics service ORATS.
Nvidia’s shares are currently valued at 32 times forward earnings estimates, exceeding the industry median of 25.4.
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