Updated Analysis of NVIDIA Corporation (NASDAQ: NVDA)

In July, we began using our “Quantamental” analysis approach to look at some of the leading stocks in the stock market.

This approach combines "quantitative" analysis, which consists mainly of technical analysis, and "fundamental" analysis of the company's operating metrics.

We have developed this approach over our thirty years as professional investors.

We have boiled down the approach to three simple analyses that we think can cover 90% of the analysis of any individual stock.

Each week in HX Daily, we will apply this analysis to one of the most popular stocks.

The second stock we looked at was NVIDIA Corporation (NASDAQ: NVDA). With their recent earnings report, we thought it would be a good time to update the analysis.

Our analysis below is not a formal recommendation on the stock. Based on our analysis, we are giving our views of what may likely happen from here.

Here is the analysis…

1. Technical Analysis

For our approach, the most critical aspect of technical analysis is the "trend" analysis.

A stock that has gone up consistently over time is in an upward trend. One that has gone down is considered to be in a downward trend.

In our view, one of the most powerful rules of the stock market is to stick to buying stocks that are in upward trends.

This doesn’t mean you can’t buy them when they are down in the short term, but you want to own a portfolio of stocks going up more than those going down.

That may seem very logical, but the reality is that is something many investors find difficult to accomplish.

Here is the chart of NVDA stock price over the last five years…

There is no doubt that this stock has a well-established upward trend. That is a bullish signal for us.

On the chart, we circled where we originally analyzed the stock.

We acknowledged the strong uptrend at the time, but the stock was also very "overbought.”

We measure this by looking at the relative strength index or “RSI.” When that number is above 70, a stock is considered overbought and vulnerable to a pullback.

When we first did our analysis, the stock was at an RSI of 57, so it was not particularly overbought. It very recently, though, had been at very high levels above 80.

This made us mildly cautious, but what gave us real concern was how it extended it was from its 50-day and 100-day moving averages. As a result, our original recommendation from a technical analysis perspective was a “hold.”

When we updated the analysis several months later, the stock had corrected, and we felt it was buyable.

Here is the updated analysis with the one-year stock price and the chart of RSI….

Today, the stock is in a similar position. It is coming off a recent all-time high, and the RSI has pulled back to a level where it is neither overbought nor oversold.

One difference, though, is that it has now consolidated around these levels for a few months. Back in July, it had gone straight up.

With the consolidation, a strong uptrend, and a reasonable RSI, the technical analysis of the stock looks interesting.

TECHNICAL ANALYSIS = BUY.

2. Earnings Revisions

Our regular readers know that we find one single indicator to be the most powerful predictor of future stock prices – the change in analyst’s estimates for earnings.

We refer to them as “earnings” revisions, but they also can be the revisions of revenue. We will usually look at the most popular measure – Earnings Per Share or EPS – and other measures, such as Earnings Before Interest Depreciation and Amortization (EBITDA).

For NVDA, the EPS revisions are most important, and here is the chart of those estimates over the last year…

As we said back in July - this chart is AMAZING!

Earnings estimates have gone from less than $0.60 for the full year 2025 a year ago to almost $3.00 now. That is an incredible move higher, especially for a company this big.

Look at the correlation between the stock price and the earnings revisions, and you can see why we think it is such a powerful tool.

Incredibly, the stock's valuation has not moved that much higher as the stock has simply kept up with the incredible rise in EPS.

These positive revisions have also seen the company blowing away the analyst earnings estimates…

In July, the company had a track record of beating numbers for every quarter in the last five years except one. They have continued that track record.

One note of caution, however, as you can see that the amount by which they are beating the numbers has been decreasing. For most of 2023 and early 2024, the company was beating by double digits. Now, it is just high single digits.

This is normal. Eventually, Wall Street analysts catch up with the fundamentals of the company.

We know that this data is backward-looking, but our experience is that when companies show this kind of momentum, it continues. We believe that you bet on that momentum until it stops.

Until we see a trend change, we expect the current trend to continue.

However, we have a note of caution here that the analysts are catching up. At some point, the stock will be vulnerable to a "disappointment" by only beating by a certain amount.

We are still determining when that will happen, though, and we are willing to hold the stock until it does.

EARNINGS REVISIONS = BUY

3. Earnings Growth

The final measure we focus on is the actual growth in the revenue and earnings.

As we showed with the EARNINGS REVISIONS, the EARNINGS GROWTH data for NVDA is fantastic.

Below, we show the table for EPS for the past decade and the next few years. We have included a table from our original report in July and for where the numbers are right now…

The company has gone from earning $0.04 a share a decade ago to earning $2.84 this year. That is a stunning 65x growth in EPS!

You can also see in the two charts how much higher earnings estimates have moved for the next couple of years. The 2026 number has gone from $3.83 to $5.34 or +40% in just a few months. Incredible.

As we said before, given the size of the company, we have rarely – if ever – seen growth of this magnitude in a public company.

This is why it has been such an incredible stock.

Again, though, this data is backward-looking. What do we think about the future?

Here is what we wrote back in July and is still true today…

“One concern is that analysts are predicting a deceleration in earnings growth, given the momentum in the stock, which could be an issue and contribute to volatility.

Some investors like to buy stocks that are beating numbers by a considerable amount and growing triple digits. Given the growth that has already happened, it is likely that NVDA stock will soon NOT be that kind of stock.

That means those investors will move on to other stocks.

There are some interesting offsets as NVDA is now such a sizable portion of the stock indices that professional investors who are measured against the index need to own it.

The deceleration in growth – and the size of the market capitalization and overall earnings – argue that the stock has less upside than it did before. This is just math.

However, we have some more significant concerns based on our long time in the stock market and following technology.

We are currently in a period of hoarding of the NVDA chips.

We saw a story about a leading venture capital firm, a16z, buying a store of NVDA chips for their portfolio companies. They believe this will give them an advantage in getting deals and helping these companies.

There is nothing wrong with this idea.

We remember, however, similar activity happening back during the Internet Bubble when companies were hoarding Cisco networking equipment and Corning fiber optic cable.

Both those companies – Cisco and Corning – saw real growth in earnings. All that equipment was eventually used to power the Internet we know today.

The problem ended up being two-fold.

First, many of the companies that were buying the equipment themselves were not profitable. That is less of an issue with AI chips, but it is still a concern.

Second – and a much bigger concern – is the natural economic reaction of supply and demand. NVDA and all its competitors are building more capacity to meet this demand.

This means that there will be more supply, which will impact pricing at some point.

Do we reach a point where – even if it is momentarily – there are too many chips, and near-term demand goes down?

It is impossible to predict, but we will share that in EVERY SINGLE OTHER similar situation, this has happened.

At some point, it WILL happen with NVDA.”

However, it hasn't happened yet, and earnings growth remains strong. As a result, it is STILL a buy.

EARNINGS GROWTH – BUY

Conclusion

As the world's largest company by market capitalization, NVDA is a stock that captivates investors.

It has posted one of the (if not THE) most incredible multi-year performances in earnings growth and share price performance in the stock market's history.

Our long experience in the stock market gives us some caution about what may happen in the next few years.

We do NOT think NVDA is the same kind of business as some of the other largest companies like Apple, Inc. (NASDAQ: AAPL) and Microsoft Corporation (NASDAQ: MSFT). It has a much more volatile end business, which will eventually play out in its earnings.

Rather than try to predict when that will happen, though, we think the right move is to own the stock until we see that evidence emerge. The stock remains a buy right here.