Nvidia earnings preview: Moment of truth…

• Nvidia’s Q4 earnings in focus

• US chipmaking giant up 40% YTD

• High-stakes event could rock markets

• Stock firmly bullish on D1/W1 timeframe

• Key levels of interest at 663.17 & 752.04

Everybody is talking about Nvidia, and why not?

The poster child of the AI boom is set to announce its earnings after surpassing Alphabet last week as the third most valuable US company!

Given how the US chipmaking giant has been at the heart of the AI mania, the stakes are high with investors looking for extraordinary results that would justify the eye-popping stock gains.

Fun fact: Nvidia shares are up 40% year-to-date, adding to its 239% gain in 2023.

When will earnings be released:

• Nvidia will report its 2023 fourth-quarter earnings after US markets close on Wednesday. 

What are markets expecting?

• The AI chip giant is expected to post earnings of $4.60 a share, and a rise in quarterly revenue to $20.4 from $6.1 billion a year ago – marking an increase of 234%!

Why is Nvidia’s earnings so important?

• Much of the stock market rally last year was fuelled by expectations around AI and the potential impacts it could have on productivity amid its continual adoption. To put things into context, Nvidia’s AI chips are in hot demand, used for large language models including OpenAI’s ChatGPT.

• The company’s earnings and forward guidance could serve as a major gauge for the AI mania while also confirming whether its valuations are justified. 

How will Nvidia react to earnings?

• Markets are forecasting a whooping 11% move, either Up or Down, for Nvidia stocks on Thursday post earnings. 

• Given how Nvidia shares ended Wednesday’s session around $675, this is equivalent to a rally towards fresh all-time highs near $750, or a sharp selloff towards $600.

What does this mean for traders?

• With a 1.7 trillion valuation, an 11% move in the price of its stock is almost $190 billion.

This is equivalent to the entire market cap of many large companies in the S&P 500, such as Intel Corp, Pfizer, and Nike. Essentially, extreme levels of volatility could be on the horizon.

• Should Nvidia's earnings satisfy investors’ lofty expectations along with the forward guidance, this could push the stock higher.

• If Nvidia's earnings disappoint in the slightest, this could trigger a heavy selloff.

How about the technicals?

Nvidia is in a weekly uptrend that started early November 2023 and has seen the stock price reach colossal heights.

It pushed through 3 weekly resistance levels that became support levels before stalling near a potential weekly resistance level at 752.04. The market structure clearly shows that a correction wave is currently in progress.

On the D1 chart, the W1 chart correction wave can be seen as a down trend.  The price is approaching a weekly support level.

Although the D1 chart is in a confirmed down trend with a lower top and a lower bottom with the short cycle Stochastics Oscillator adding validation, both the 21 Simple Moving Average as well as the longer cycle Moving Average Convergence Divergence (MACD) Oscillator are still to the upside. This means caution should be exercised with tight risk management for any short opportunities at this time.

If the price, however, breaks through the weekly support level at 663.17, the downside might gather more momentum as buyers will tend to cover their positions, thus adding to the selling positions in the process.

If the weekly support level at 663.17 holds, the buyers might be encouraged to add to their longer-term positions and this might boost the potential upside momentum.