NVIDIA Stock Dropped After Earnings: Is this a Good Buying Opportunity?

Key Insights

• NVIDIA stock price retreated after the company published its earnings.
• It released strong revenue growth and boosted its buyback.
• The retreat may form a good buying opportunity for the company.

NVIDIA’s stock price fell nearly 2% on Thursday after the company released its quarterly earnings. Shares dropped to around $220 after reaching a record high near $236 earlier this month.

The decline came despite another strong earnings beat, as investors locked in profits following the recent rally.

Why NVIDIA Stock Dropped After Earnings

NVDA stock price retreated after its much-awaited financial results on Wednesday. These numbers showed that the company was firing on all cylinders as the artificial intelligence (AI) boom accelerated.

NVIDIA’s revenue jumped to over $81 billion in the first quarter, much higher than the $79 billion that analysts were expecting. This beat was in line with what the company does in most quarters.

Most notably, Jensen Huang decided to boost the forward guidance. He now expects that the company will make $91 billion in the current quarter. This seems like a conservative quarter as the company did not include its Chinese business in this guidance.

Still, NVDA stock price crashed after its financial results. This happened for three main reasons. First, the strong results were in line with analysts’ and investors’ expectations. Besides, these participants had observed their clients publish strong numbers and guidance. They also saw their suppliers’ results, including TSMC, Samsung, and Arm Holdings

As a result, the stock jumped to a record high ahead of its earnings. It then retreated after the numbers came out as investors sold the news. This situation is known as buying the rumor and selling the news.

Second, there are concerns on whether the company can sustain its strong revenue growth amid the rising competition. Most of this competition is expected to come from popular companies like Microsoft, Amazon, and Google, which are building their chips.

A good example of this is Anthropic, which is now valued at $900 billion. Instead of using NVIDIA chips, the company has built its business using those made by Amazon and Google.

Third, the stock retreated as investors booked profits as they waited for the next catalyst. That’s because the stock was up by 43% from its lowest point in March this year.

Why NVDA Stock is a Good Buy Today

There are a few reasons why the recent NVDA stock price crash is a good buying opportunity. First, while growth fears are real, there are signs that the company has more room to run. For one, analysts expect that its annual revenue will jump to nearly $400 billion this year followed by $507 billion next year.

Second, despite the stock trading near its all-time high, there are signs that it is a bargain. It has a forward price-to-earnings (PE) ratio of 27, which is quite cheap for a company experiencing this robust growth. Also, it is one of the most profitable, enjoying a net profit margin of over 55%.

Third, the company has some more catalysts today. For example, it plans to launch its own CPUs, which will open new revenue streams. Also, it will start making billions of dollars in China, and benefit from the upcoming OpenAI IPO.

NVIDIA Stock Price Technical Analysis

Technical analysis suggests that the NVDA stock price has pulled back in the past few days. This retreat happened after peaking at $236, a record high. Such a retreat is a sign that investors are booking profits.

On the positive side, the stock remains above the key support level at $212, the upper side of the cup-and-handle pattern. As such, it is likely forming a break-and-retest pattern, a common bullish continuation sign.

Shares also continue trading above major moving averages, suggesting broader momentum remains intact despite recent weakness.

If buyers defend the current range, NVIDIA stock could retest resistance near $236 in the coming weeks. A breakout above that level may reopen the path toward the $250 region later this year.

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