Nvidia Stock Analysis— What to Expect & How I’m Positioning Myself

Over the past half a year or so, we’ve seen Nvidia experience a substantial amount of growth, with its stock price increasing more than 160% year to date. This easily makes Nvidia one of the best performing stocks this year, and has also made it the center of attention for many investors and traders across the globe.

Source: Shutterstock

Nvidia’s success this year can be attributed to a couple key factors:

1. Solid Leadership in the Semiconductor & AI Industry: Long before investors recognized Nvidia’s role in the development of AI, Nvidia established itself as a leader in the semiconductor industry. The company has a solid grasp over the GPU market, as shown by its market share, which has been consistently over 80% since 2022 (Source: Investing.com). It is more than likely that massive amounts of computing power will be required to support the constant development of AI over the next few decades, and Nvidia has shown its competence in this area. This is one of the main reasons why Nvidia is a solid leader in not just the semiconductor industry, but also the AI industry, and will be able to reap a significant share of the rewards in this lucrative industry.
2. Innovation: Nvidia has continued to innovate, consistently releasing new technology to gain itself an edge in the AI industry and staying well ahead of competition. Nvidia’s Blackwell and Ruben chips are obvious examples, each bringing computing power a huge step forward. Not only that, these upcoming innovations are often highly anticipated by investors, and contribute to the overall bullish market sentiment.

AI is an industry that has, and will continue to have massive room to grow over the next couple decades, and that these factors will continue to drive Nvidia’s growth as the AI industry matures. However, every major trend must have minor ups and downs on the way, and a trend that continues in the same direction indefinitely is virtually impossible. This leads me to believe that despite Nvidia’s impressive performance this past year, a small to medium scale pullback may occur in the near future.

Here are a couple factors contributing to my conclusion.

1. Insider Selling Patterns: While retail investors continued their buying frenzy this month, Nvidia’s insiders were busy taking profits on their holdings. This month marks an all time high for Nvidia’s insider selling (Source: Nasdaq), with multiple sales from some of Nvidia’s core management including CEO Jensen Huang, who personally sold more than $90 million worth of shares, CFO Colette Kress, as well as CAO Donald Robertson. In the past, insider trades have always been a pretty accurate signal for investors, and this large spike in insider selling could potentially mean that the company’s management believes that the stock has reached its peak in the short term. In addition, this could contribute to a temporary decline in stock price as well when the market reacts to these signals.
2. Technical Analysis: Multiple widely recognized technical indicators currently show that Nvidia is at an overbought price zone. Stock price is currently hovering near the upper band of Bollinger Bands 2 standard deviations from a 120 SMA (longer timeframe selected for a more long-term oriented perspective), the Relative Strength Index (RSI) adjusted for both a 50 as well as 120 day close both display values at approximately 62 (Noting that 70 is the overbought zone and 30 is the oversold zone), and the MACD (across multiple configurations) has also shown a bearish cross very recently.

Nvidia has indeed delivered results that satisfy expectations, but out of the factors driving Nvidia’s stock growth, a large share may still be made up of hype for AI and FOMO in not just retail investors, but also many professionals and fund managers who are essentially forced to buying in order to not fall behind overall market performance. At some point, the hype and FOMO factor will become less relevant as fundamental factors take control, this is likely to come in the form of a pullback/market correction at some point in the near future.

Given the likelihood of a pullback, here is how I will be positioning myself:

Personally, I’m in Nvidia for the long run as my “AI play”. I see long term value in the company, and I believe that the company’s value will continue to appreciate in the long run as the AI industry matures. Therefore, a short term pullback would not bother me too much. I’ll likely be holding on to the shares that I already hold unless an unlikely severe issue with the company’s fundamentals arise. In response to a pullback, I would use the opportunity to increase my position as it would allow me to buy additional shares at a much lower price, positioning for more future gain.

Nvidia’s fundamentals reflects a solid grasp over its market as well as a dominant position in key technological sectors in the AI industry. While a short term market correction may occur as a result of the stock being overbought (overhype, FOMO, etc.), the long term outlook for the company continues to remain positive. From my current perspective, a pullback would likely be a temporary correction driven by market dynamics rather than a shift in the company’s fundamentals.

That’s all from me, thanks for reading! If you enjoyed reading, I’d really appreciate a like or a follow :)