Looking at the price charts for Nvidia (NASDAQ: NVDA) for the last trading day – Monday, February 12 – and for the entire 2024 so far can, and certainly has for many investors, triggered a gut feeling that the surge cannot continue – not without a break at least.
Since the year began, the semiconductor giant’s shares have been steadily rising, with hardly any insecurity creating almost a straight line between January 1 and February 13.
The daily chart for the last full trading session, on the other hand, tells a different story as the stock continued with its upward trajectory in the morning only to pivot – without an obvious reason – and ultimately close 0.16% in the green at $722.48, albeit, it did hit another all-time high during the day.
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Nvidia’s market cap only reinforces this notion of incredibly strong yet worrying growth – the company started the year valued at approximately $1.22 trillion and is, at press time, less than a month and a half later, at approximately $1.78 trillion – $500 billion more.
Indeed, the recent price action caused many to speculate that Nvidia has become a bubble – and indeed, the relative strength index (RSI), a popular technical analysis (TA) tool, shows that the semiconductor’s stock is significantly overbought – and thus, susceptible to a major correction.
Despite this, some experts like Fundstrat’s Tom Lee do not believe that there is an Nvidia bubble and instead interpret the price movements as a result of genuine demand – particularly due to the company’s crucial role in the artificial intelligence (AI) boom.
In this climate of uncertainty, Finbold decided to consult the AI-driven predictive algorithms
to see what they estimate will happen to the world’s leading semiconductor company before 2024 is out.
AI forecasts imminent crash for Nvidia stock
The predictive algorithms, as it turns out, lean more to the bearish side. In fact, the chart plotting nearly every price point save for the 1-year projection is rather gloomy and even forecasts a crash to $664.42 by the start of next week.
If this sudden 8.04% drop wasn’t enough, the AI forecasts only a middling recovery in the next 30 days to just below $690 before an even greater, 40.04% collapse to $433.22 – below NVDA’s January 1 prices – in three months’ time.
On the other hand, the algorithms are far more bullish in the long term. Indeed, the year-end price prediction comes in at $805.89 – 11.54% above the latest close.
Additionally, the platform currently considers it likely Nvidia’s performance in the first six weeks of 2025 will closely mimic that of the start of 2024 – albeit with more volatility. Interestingly, however, the AI also foresees that NVDA stock’s mid-February performance will again lead to a correction as there is a sharp drop on the forward-looking chart on February 10, 2025.
Ultimately, the platform considers it likely that the chip maker’s shares will stand at $796.23 in 365 days.
Investors fearful as RSI shows NVDA is overbought
In addition to the forward-looking chart, the platform reveals that the 14-day RSI for the company shows that the shares are overbought at 74.44 – hardly a surprising reading that the indicator has been continuously hinting at the same fact for weeks.
Additionally, given that NVDA had 18 green days out of the last 30, a prevalent bullish sentiment remains on the market.
Nvidia positioned to benefit from AI and gaming boom
Whether Nvidia is set for a short-term correction – no matter how big – is probably nowhere near as important as its long-term prospects – except for those seeking to short the stock.
At the surface level, it appears that there is a machine-expert consensus that, in the long run, Nvidia has only one place to go – up. There is significant bullishness when it comes to the AI industry with new manufacturing devices at play, and even with a rumored $7 trillion drive to provide it with the infrastructure it needs to thrive fully.
The gaming industry – another sector in which Nvidia is a key supplier – also appears strong, meaning that the demand for advanced microchips is likely to continue growing.
Despite this, it is important to note that certain systemic risks persist. The AI sector, or rather, the big companies that hoped to significantly cut costs using AI, already took a big legal hit in 2023 when it was decided that machine-created works could not be protected with copyright.
Is Nvidia really at risk?
At the time of publication, other cases that might jeopardize artificial intelligence as we know it – two copyright infringement lawsuits made by The Times and by a group of prominent authors – are ongoing.
By OpenAI’s own admission in court filings, should the judge rule that the vague ‘Fair Use’ principle does not apply to large language models (LLMs), training such tools might be temporarily impossible.
Finally, despite the apparent strength in the gaming industry – and Microsoft (NASDAQ: MSFT) growing beyond $3 trillion upon acquiring Activision-Blizzard – the mass layoffs and certain announcements give cause for worry.
It is worth remembering that complete-on-release and regularly-priced titles such as Larian’s Baldur’s Gate 3 – overwhelmingly well-received by the customers – are increasingly an exception and the dangers of attempting to provide little content while price-gauging – an increasingly common approach – have become evident with Total War’s and Creative Assembly’s recent struggles.
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Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
