Nvidia May Raise Already-High AI Growth Outlook

NVIDIA Corp. shares rose more than 1% in Tuesday's premarket trading as risk appetite improved. Nasdaq futures gained 0.97%, while S&P 500 futures rose 0.49%.

Investors are positioning ahead of Nvidia's earnings report on Wednesday. Trading could become more volatile ahead of the major earnings event as investors adjust their exposure.

Meanwhile, Nvidia shares are trading near several widely watched moving averages. As a result, even modest buying could influence the stock's short-term direction.

Beyond the headline results, Wall Street will focus on Nvidia's Rubin product cycle, gross margins, and financial support for major AI projects.

Rasgon Sees Rubin Driving Data Center Growth

Bernstein analyst Stacy Rasgon said on CNBC Saturday that he expects Nvidia to report strong quarterly results. However, he will closely monitor management's commentary on the Rubin rollout.

Nvidia's three-year outlook points to roughly $500 billion in data center revenue next year, Rasgon said. However, Rubin's buildout plans suggest revenue could exceed that level. Therefore, he wants to know whether management will raise its guidance.

Gross Margins and AI Funding Draw Attention

Rasgon will also watch whether Nvidia can maintain gross margins in the mid-70% range amid rising memory and wafer prices. Management has previously indicated margins could hold near current levels.

Additionally, he wants more details on Nvidia's financial support for major data center projects. Rasgon believes the company's balance sheet is a strategic advantage.

He said using excess cash to support customers could expand the AI ecosystem. It could also strengthen long-term demand for Nvidia's products.

Rubin Could Extend Nvidia's Upside Momentum

Rasgon cautioned that strong earnings may not immediately drive the stock higher. Other semiconductor companies recently reported solid results but did not receive positive market reactions.

However, he believes Nvidia remains critical to global AI infrastructure buildout. The stock has lagged several semiconductor peers for most of the past year but has recently begun to outperform the sector.

Rasgon views the Rubin cycle as a potential catalyst for further upside. Historically, Nvidia's new product cycles have created favorable conditions for the stock.

This backdrop makes the stock's position near several key moving averages particularly important. Strong earnings and an upbeat Rubin update could help buyers push Nvidia through nearby resistance.

Technical Analysis

Nvidia maintains a long-term uptrend. The stock trades approximately 8% above its 200-day simple moving average. Its 50-day average also remains above the 200-day average, a bullish signal.

The stock holds above its 50-day and 100-day averages. However, it trades about 1% below its 20-day simple moving average of $213.78. This suggests recent movement is a pullback within a broader uptrend rather than a confirmed breakout.

Short-term momentum has weakened. The moving average convergence divergence indicator sits below its signal line with a negative histogram. This indicates the recent rally is losing momentum.

Resistance sits near $214, close to the stock's short-term moving average zone. A sustained move above that level could open a path toward the 52-week high of $236.54.

Support lies near $190, where buyers previously stepped in. A break below that level could signal a deeper pullback.

Earnings and Analyst Outlook

Nvidia is scheduled to report earnings on Wednesday.

Analysts expect earnings per share of $2.09, up from $1.04 in the same period last year. Revenue is projected to reach $92.03 billion, compared to $46.74 billion a year ago.

The stock trades at a price-to-earnings ratio of 31.9x, reflecting a premium valuation.

Nvidia holds a consensus buy rating. Its average price target is $328.79.

Raymond James raised its target to $352 from a previous level on Tuesday and maintained a strong buy rating. Rosenblatt maintained a buy rating and $325 target on Monday. KeyBanc also maintained an overweight rating and $330 target on Monday.

Edge Ranking

Nvidia's momentum score is 49.19, placing it in the middle of the market. Its quality score of 97.72 and growth score of 99.18 reflect strong business performance and growth expectations.

However, its value score of 6.02 indicates the stock appears expensive based on traditional valuation metrics.

Overall, the Edge scorecard shows a high-quality growth company with a premium valuation. The stock's next sustained move may depend on whether buyers reclaim resistance ahead of earnings.

Top ETF Exposure

Franklin Focused Dynamic Growth ETF holds a 9.73% weight in Nvidia. First Trust Innovation Leaders ETF has a 9.79% weight, while Xtrackers Net Zero Pathway Paris Aligned US Equity ETF holds a 9.94% weight.

Given Nvidia's significant weight in these funds, large ETF inflows or outflows could trigger buying or selling in the stock.

Price Action

Nvidia shares rose 1.30% to $211.20 in Tuesday's premarket trading.