Nvidia (NVDA) shares have climbed back to their highest level since June 22, recovering roughly 10% from the lows hit last month. The stock's recent rebound has caught the attention of technical analysts, who see a classic falling wedge pattern forming on the daily chart—a setup often associated with bullish breakouts.
Despite the recovery, Nvidia still lags the broader market this year. The stock is up about 10% year-to-date, underperforming the Nasdaq 100's 15.7% gain. This relative weakness has pushed Nvidia's valuation to levels that some analysts consider attractive. The forward price-to-earnings ratio now sits at 22, only slightly above the S&P 500's 21, and well below Nvidia's five-year average multiple of 43.
A discounted cash flow analysis by Simply Wall St. estimates Nvidia's fair value at $220, suggesting the stock is roughly 7.7% undervalued. The forward PEG ratio has also dropped to 0.50, compared to its five-year average of 1.46. These metrics could encourage the company to expand its share repurchase program. In its most recent earnings report, Nvidia authorized an additional $80 billion in buybacks, and it has been steadily reducing its outstanding share count—from 24.3 billion in 2023 to 24.2 billion currently.
Revenue Growth Accelerates, but Risks Loom
Nvidia's fundamental momentum remains strong. Last quarter, revenue surged 85% year-over-year to $81.6 billion, fueled by sustained capital spending from hyperscale cloud providers and enterprise customers. Recent earnings from Samsung and Micron suggest that robust spending continued into the current quarter. Analysts expect Nvidia's revenue to jump 96.2% in the most recent quarter to $91.75 billion.
The company is also expanding into the CPU market, which it believes could generate over $20 billion in revenue this year, driven by the rise of AI agents. However, competition is intensifying. OpenAI has unveiled its own chip, developed in collaboration with Broadcom. Google is ramping up production of its TPUs, while Microsoft and Amazon are developing custom silicon. These moves pose a growing threat to Nvidia's dominance in AI hardware.
Regulatory headwinds could also slow the data center buildout. New York recently became the first state to impose a moratorium on new data centers, and other states may follow. Such policies could temper the explosive growth in AI infrastructure spending.
Technical Setup Points to Potential Breakout
From a technical perspective, Nvidia's daily chart shows the stock has formed a falling wedge pattern and is now trading just above its upper trendline. The 200-day exponential moving average has provided strong support, and the stock is currently within the Ichimoku cloud. If the pattern holds, the next upside target is the all-time high of $235. A decisive move above that level could open the door to $300.
For investors monitoring the AI chip space, related developments include Meta's custom AI chip being viewed as complementary rather than a threat, and Broadcom's Tomahawk 6 targeting Nvidia's networking stronghold. Meanwhile, Nvidia has lagged some AI peers as rotation toward memory and infrastructure plays accelerates.
This article is for informational purposes only and does not constitute financial advice.
