Nvidia's Meteoric Rise: What You Need to Know

Nvidia (NVDA) has ignited the stock market with a staggering 84% surge in less than four months, momentarily reclaiming its title as the world's most valuable company. However, this rapid ascent has sparked caution among analysts, with BTIG’s Jonathan Krinsky shedding light on potential red flags.

Is Investor Sentiment Too High?

Krinsky has highlighted that Nvidia's 14-day relative strength index recently peaked above 80, indicating that the stock may be overbought. While this doesn’t necessarily forecast an immediate market correction, it’s a signal that investor enthusiasm could be reaching unsustainable levels. Yet, Nvidia's upward movement is backed by strong trends, notably a U.S. policy shift that has paved the way for the company to resume sales of crucial AI chips to China.

Potential Revenue Recovery on the Horizon

According to Bloomberg, this policy change could enable Nvidia to recover a significant portion of the $15 billion in data center revenue that was previously in jeopardy for Fiscal Year 2026. Despite this bullish outlook, some investors like James Abate of Horizon Investments are starting to pull back, concerned about Nvidia's escalating valuation and the market's possible underestimation of the cyclical nature of the AI business.

Valuation Insights: Is It Worth the Price?

Currently, Nvidia trades at approximately 34 times its expected earnings for the next year, a marked increase from under 20 in April but still below its five-year average of 40. While these earnings multiples are typical for high-growth tech firms, they beg the question: How much future success is already baked into the stock price?

Upcoming Earnings: A Crucial Test

With the market's focus now shifting, all eyes are on impending earnings reports from tech giants that significantly impact Nvidia's financial health. Alphabet (GOOGL) is set to report on July 23, followed by major players Microsoft (MSFT) and Meta (META) on July 30. Collectively, these companies represent over 40% of Nvidia's revenue stream.

Analyst Ratings: Strong Buy Consensus