Nvidia Stock Sell-Off Resumes After Samsung Earnings: Why July Will Be Crucial

Key Insights

• Nvidia stock continued its strong downtrend in the premarket today.
• Samsung, a key supplier, published strong financial results.
• Technicals point to a rebound as key companies release their numbers.

Nvidia stock price resumed its downward trend in the pre-market as semiconductor and memory companies fell after the strong Samsung earnings. It dropped to $190, down by 20% from its all-time high. This article explains why this month will be important for NVDA shares.

Nvidia Stock Slipped After Samsung Earnings

NVDA and other semiconductor companies dropped sharply even after Samsung delivered some of the best earnings in the tech industry. Samsung Electronics said that its operating profit jumped to $58 billion in the second quarter, higher than what analysts were expecting.

The company also boosted its guidance, with the management citing the unprecedented demand from hyperscalers. Still, despite these strong numbers, the stock tumbled by over 6% in South Korea. Other similar companies like Kioxia, SK Hynix, and Micron also tumbled.

Still, these results are actually bullish for Nvidia because it is a sign that demand remains robust in the AI industry. Also, Samsung is a supplier of HBM memory chips to Nvidia, a sign that it likely continued buying.

The memory and semiconductor sector dropped after the Samsung earnings, likely because the results were priced in. As a result, there are signs that investors are booking profits.

At the same time, the sell-off is happening because of a major warning from Morgan Stanley’s Mike Wilson. In a Bloomberg interview on Monday, he said that he believes that semiconductor and memory stocks will correct as investors rotate to hyperscalers, which have dropped in the past few months.

Next Few Weeks Will be Crucial

The next few weeks will be crucial for Nvidia, a company that publishes its numbers in August. That’s because investors will receive earnings from some of its suppliers and customers.

Samsung and Hon Hai published strong numbers this week, and Taiwan Semiconductor will be next on July 16. TSMC is a notable company because Nvidia has become its biggest client, passing Apple. Strong TSMC earnings will likely mean that Nvidia boosted its orders.

Meanwhile, Intel and AMD, which are the top competitors to Nvidia, will publish their numbers later this month. These numbers will provide more information on CPU and GPU demand. CPUs have become a crucial part for Nvidia as it launches its own models.

Most importantly, the biggest Nvidia clients like Microsoft, Amazon, Google, and Meta Platforms will publish their financial results. These numbers are important because some of these stocks have retreated in the past few months because of their massive spending.

The most important results will be from Meta Platforms as the company will likely shed light on its business following results that it wants to start leasing its extra computing capacity. Mark Zuckerberg and the team will explain why this is happening and whether it is a sign that it will reduce its spending.

Other companies will also share their spending plans now that key inputs like memory and semiconductors are rising. There is a possibility that these firms will signal modest capital expenditure to boost their stocks.

Nvidia Stock Price Forecast

The daily chart shows that Nvidia shares have plunged in the past few months. While it has dropped by 20% from its peak, this is not a cause of alarm for two main reasons. First, the stock remains above the 200-day moving average. Dropping below that level would send a warning signal that bears are prevailing.

Second, a highly bearish pattern known as a falling wedge has emerged, with its two lines nearing their confluence. It has also found support above the Ultimate Support of the Murrey Math Lines tool. Therefore, the stock will likely bounce back, with the initial target being the psychological level of $200. Rising above $200 will point to more gains, potentially to $236.

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