Nvidia Technical Analysis and Forecast

7 Dec 2024

Nvidia is an excellent semiconductor chips company with great products and significant growth in the data centers segment. It is considered one of the key chip companies in developing artificial intelligence (AI). Nvidia is one of the key components of the Semiconductor Index, SOX, and Nasdaq 100, NDX.

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Nvidia's stock price has been a great performer in the last 10+ years, bringing its market cap to about 3.5 trillion dollars. The chart shows a recent comparison of Nvidia market cap to other trillion-dollar companies. 

Compare Nvidia’s market cap to the GDPs of Italy, France, the United Kingdom, and Germany, which are approximately 2, 2.8, 3, and 4 trillion dollars, respectively.

From a fundamental point of view, one can wonder whether such a high valuation is justifiable. Is it realistic for a chip company to have a market cap comparable to that of the largest European economies? Risk factors include competition, mismanagement, and a slowdown in the economy that could affect the growth of Nvidia’s fastest-growing product segments.

Let's explore what technical analysis of Nvidia's stock price, which has the ticker symbol NVDA, can tell us about its prospects.

Consider what cycles detected on the weekly chart can reveal about Nvidia’s stock price forecast. We will ignore the shorter cycles as we are primarily interested in the long-term trends of NVDA stock.

The dominant cycle on the weekly chart is a 3.4-year cycle. Most indices and significant stocks follow a 3-3.5-year cycle, also known in the economic literature as the Khichin cycle.

The cycle chart shows that the 3.4-year cycle has likely started its down phase, with the next cycle trough in 2026. The chart also shows a strong negative divergence between the NVDA stock price and the Cyclic Relative Strength Index, cRSI. This signifies that a top of significance is forming.

One should be careful not to make price predictions based on a single cycle or even multiple cycles alone. Many cycles affect the stock price, and they cannot all be captured from a chart of a given time scale. In addition, there are measurement inaccuracies, cycle variations over time, and “market noise,” such as various fundamental news releases.

The cycle composite, comprising cycles with periods between 20 weeks and 7 years, shows finer details about multi-year NVDA trend changes. 3.4- and 7-year cycles are expected to have approximately synchronous cycle troughs in 2029.

Double-sided arrows illustrate the required tolerance of price peaks and troughs relative to estimated cycle composite peaks and troughs. It is good practice to allow for a tolerance of 15 percent of the dominant cycle period.

While time cycles provide approximate turning points in the price pattern, cycle price projections using the Forward Line of Demarcation (FLD) method provide a very reliable price target for individual cycles.

The NVDA stock price satisfied all cycle price projections except for the 20-day cycle.

The daily NVDA chart shows the 20-day cycle price projection of Nvidia stock of approximately 155-158. The up projections for this cycle have been very reliable in the past, with price targets fully met in 95 percent of cases.

In addition to cycles, Elliott Wave analysis provides useful trend information, and often, it also provides good price targets together with appropriately applied Fibonacci levels.

The Elliott Wave analysis of NVDA’s monthly chart reveals that NVDA stock price is completing cycle-a wave (red) of the supper-cycle-(a) wave (purple). The key to determining this Elliott Wave count is the triangle that formed between 2003 and 2010. A correction in the super-cycle-(b) wave can take NVDA’s stock price significantly down, perhaps into the 2029–2030 time interval, as can be concluded from the time cycle analysis. One can expect cycle degree waves a, b, and c of super-cycle-(b) to be completed in 2026, 2027-2028, and 2029-2030, respectively.

Zooming in on the daily chart, I can postulate two alternate counts: 1) the red already topped in intermediate wave (5), and 2) the black count that suggests that wave (5)  is still in progress toward the identified 20-day Nvidia cycle price target. Considering this cycle target's high reliability, one can prefer the black count.

Setting aside Nvidia's fundamentals, the comprehensive technical analysis using cycle and Elliott Wave methods suggests a multiyear weakness in the NVDA stock price.