Nvidia Stock Has Sunk Into Correction: Top Reasons it Will Recharge Soon

Key Insights

• Nvidia stock price has pulled back in the past few weeks.
• The company will benefit from the upcoming OpenAI IPO.
• Nvidia has become a highly cheap company despite its revenue growth.

Nvidia stock price has sunk into a correction, moving from the year-to-date high of $236 to $205 today. It has underperformed the market, with the S&P 500 and Nasdaq 100 indices surging to their all-time highs. Still, there are some key reasons why the NVDA stock may rebound in the near term.

Nvidia Stock to Benefit From the OpenAI IPO

One major catalyst for the stock is the upcoming OpenAI IPO, which is set to happen later this year. The company has already filed its IPO papers, with analysts expecting the listing to happen later this year, especially after the successful IPO of SpaceX.

OpenAI has become one of the most successful companies in the world. It disrupted the AI industry, with its valuation jumping to close to $900 billion today.

Nvidia stands to benefit from the upcoming OpenAI IPO. For one, the company made an investment in OpenAI recently and could experience substantial returns if the stock jumps after its listing.

At the same time, Nvidia will benefit because some of the funds it will raise will flow to it directly and indirectly. That’s because the company has become one of the biggest spenders in the data center industry. For example, it has inked several deals with companies like CoreWeave and Amazon, which will, in turn, use the funds to buy Nvidia chips.

NVDA Stock to Benefit From its Cheap Valuation

The other important aspect is that, despite its strong revenue growth, Nvidia is also one of the cheapest companies.

There are several ways to look at this, with the forward price-to-earnings (P/E) ratio being the most widely used. For example, the company has a forward P/E ratio of 22, which is lower than that of other technology companies.

For example, AMD, another top chip company, has a forward PE ratio of 68, while Marvell Technology has a multiple of 69. Intel has a forward ratio of 114, while the S&P 500 Index has a forward ratio of 21.

The company also has one of the best Rule-of-40 multiple in the industry. It’s forward revenue growth of 81%, and a net profit margin of 55%, giving it a multiple of 136%.

NVDA Revenue and Profitability Growth Continues

More metrics suggest that the company is still firing on all cylinders, with its revenue and profitability metrics continuing their uptrend.

Data compiled by Yahoo Finance shows that its forward revenue growth is 81% this year. In most cases, the company normally does better than estimates, meaning that its revenue may jump to over $400 billion for the first time ever. It will then make over $551 billion in revenue next year.

Most notably, these estimates don’t include some of the potential catalysts. They don’t have the revenues for the H200 chips to China, and the recently launched Vera CPUs.

Therefore, the company will continue thriving as the AI boom is still accelerating despite some major challenges.

NVDA Stock Price Technical Analysis

The daily chart shows that the NVDA share price has pulled back in the past few days. It dropped from a high of $236 to the current $205. This price is important because it coincides with the 100-day Exponential Moving Average (EMA).

It also bottomed at the Major S/R pivot point of the Murrey Math Lines tool. In most cases, rebounds start in this support area.

Therefore, the most likely Nvidia stock forecast is bullish, with the next key target to watch being the psychological level of $212, its previous all-time high. A move past that level will point to further gains, potentially to the all-time high of $236, followed by the psychological level of $300.

However, be on the lookout for the key support at $187, the Strong, Pivot, Reverse level of the Murrey Math Lines. A drop below that level will point to further downside.

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