NVDA Stock: Will It Continue to Grow in Q3?
This NVDA stock forecast article is written by Hao Liu, financial analyst at I Know First.
Summary
- Impetus for spending is likely to fade away for some technology segment, but not semiconductor
- Nvidia business transformation into AI and machine learning could bring big wins
- NVDA stock is a strong buy, especially in the long term
New Dynamics of Technology Sector
Half of this year has passed quickly while people are fighting against COVID-19. From the results of first two quarters, it is widely acknowledged that the technology realm has been greatly rewarded. However, some analysts believe that the third quarter may be a different story for some technology companies. According to these analysts, the prime time of their prosperity may have passed because the spending spree of technology products in Q1 and Q2 are unlikely to last into Q3. This is true for both enterprises and individual consumers as companies and individuals have all to some extent learned and adapted to working from home with the help of technology.
This will be the new dynamics for technology sector. Under this dynamic, the past impetus for spending in the third quarter such as back-to-school spending is unlikely to happen now that children can study at home. Also, companies selling tech gadgets like smartphones may become less appealing as people may find other devices like pads and PCs more useful at home. Just as analyst Connaughton pointed out, “Right now every boat has come off the bottom, to go to the next level you actually have to outperform.”
Semiconductor Segment Will Continue to Grow
As some analysts look pessimistic on certain technology segments such as ad-tech segment, they are rather confident about semiconductor segment. Semiconductor ETFs have shown strong momentum of the industry to grow into the rest of the year early in June. This is verified again in a more recent discussion MarketWatch had with four analysts a few days ago this month. All analysts agreed that semiconductor industry is a promising segment within the technology industry under the new dynamics.
Potential Big Wins for Nvidia
Nvidia has been long known as a graphics-chip maker for video gaming. However, over recent years the company has transformed into an accelerated computing company. It is now more of a data-center company with an increased focus on AI and machine learning. I believe this transformation will drive Nvidia to outperform the others – as it is not only rewarded in current pandemic, but also expanding and adapting its businesses to where the future of technology industry lies.
Earlier this month, Nvidia announced its partnership with Google Cloud with introduction of its new chipset called the A100, which can power its cloud infrastructure to improve AI workloads. This could be a big win for Nvidia. This chipset is powerful enough to power AI to tell the difference between scientific computing, 5 services, and more. If this trial into AI proved successful, Nvidia will be firmly added to the leaderboard for AI-focused companies. Moreover, for the technology industry, the generation of computing chips designed particularly for AI could enable a host of new applications. “This breaks with convention”, according to Dan Hutcheson, CEO of semiconductor research firm VLSI Research.
Another potential big win for the company comes with Nvidia’s recent partnership with Mercedes-Benz to provide a software-defined computer network for its cars. Recent NVDA stock price performance reflects its ability to capitalize on the recent trend to go digital. But Nvidia will also face many challenges as it declared to compete against another auto vehicle company Tesla. While it is announced that Mercedes will begin delivering over-the-air software updates to its entire fleet through a complete solution provided by Nvidia staring 2024, Tesla has already finished its over-the-air updates.
Strong Buy for NVDA stock in Long Term
One thing to notice about the company’s financials is it has beaten the consensus EPS estimates in each of the trailing four quarters. This is a very positive sign indicating great potential for future growth.
Most financial analysts are pretty bullish about the company, estimating the price to go over $400 in the future.
With a similar view with the financial analysts, I Know First AI also delivers a bullish outlook on NVDA stock. In the short term, the bullish signals are respectively 0.55 and 2.02 for 1-month and 3-month time horizon. In the long term of one year, the bullish signal is very strong at 258.21.
Past I Know First Success with NVDA Stock
I Know First has been bullish on NVDA stock in past forecasts. On April 1st, 2020, the I Know First algorithm issued a bullish forecast for NVDA stock price. This algorithmic trading tool successfully forecasted the movement of the NVDA stock in three months, NVDA stock price has risen by 44.61% in line with the I Know First algorithm’s forecast. See charts below.
Conclusion
With recent partnerships with Google and Mercedes-Benz, Nvidia is taking big steps to adapt its business into future technology – AI and machine learning. Considering that the semiconductor segment itself is predicted to be thriving even after the pandemic, Nvidia’s business adaption could potentially bring bigger wins in the long term.
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Please note-for trading decisions use the most recent forecast.
