Nvidia’s stock has just done so for the first time in 3 years. Here is what the story says will happen next

Nvidia (Nvda 3.16%)) Investors amazed in recent years, climbing with what seemed to be an impulse constantly to reach record levels. The action even climbed beyond $ 1,000 last year before the company launched its share of shares, a decision to lower the price by sharing. All this is thanks to Nvidia’s position on one of the most watched markets today: artificial intelligence (AI).

Analysts expect this market to explode above during the decade, and the developments that we have seen so far support this idea. Technology giants invest billions of dollars in their AI programs – and many are already starting to see the efforts bearing fruit. For example, AmazonLast year, the Cloud Computing arm posted a income rate of $ 115 billion while customers opted for its IA products and services.

All of this helped Nvidia’s income to climb. The course of action followed until recentlyBecause the concerns concerning the general economy prevailed over optimism concerning the financial results of Nvidia and the future prospects. In fact, last week, Nvidia Stock did something he has not done for almost three years. Let’s take a look at this decision and examine what says history will happen next.

Image source: Getty Images.

Nvidia’s “Cross of Death”

Whether you are new in investment or you have bought shares for years, you may have heard technical analysis. This implies looking at historical market data to predict what stock could do next. It is often associated with a short -term investment because it could guide you to buy or sell at a specific time to potentially benefit from it. Well, in the world of technical analysis, Nvidia’s stock has just taken a big step. Its 50 -day mobile average (an average price trend over a given period) last week went below its mobile average at 200 days, forming what is called a “cross of death”.

And a cross of death suggests that the negative impetus resumes and that it could become a lasting trend. Now let’s see how Nvidia’s actions operated following his last death cross – in April 2022. The measure was a precise predictor of what was going to happen, because Nvidia’s actions have flowed at around 45% from that moment in the rest of the year.

Simple average nvda of 50 days data by Ycharts

Another decision of this type occurred in November 2018, and Nvidia’s shares fell more than 40% in the following nine months.

Simple average nvda of 50 days data by Ycharts

So, does that mean that Nvidia is going absolutely for a sustained period of losses and that you should stay away from the stock? Not necessarily. It is important to remember that, although technical analysis may successfully detect short -term trends, it does not take into account the fundamentals – as an excellent profits – or positive news that the company can point out at any time. Day traders find these models useful because they buy and sell in a few hours or days, but long -term investors should not let a technical trend affect their investment decisions – for two key reasons.

The true value of a business

First, as mentioned, the technical analysis does not take into account the true value of a company such as measured by its fundamental principles. This essentially indicates when you can buy or sell in the short term to display a gain. But, to potentially mark an even greater victory, you would better bet on a quality stock for a number of years so that you can benefit as the company develops and develops on its market.

Second, the feeling of a given action – in this case, NVIDIA – can move overnight. At any time, if a key external element that weighs on Nvidia changes, the stock could take off. For example, if the Trump administration stands out The latest prices On imports or reaches an agreement with business partners, that news can raise Nvidia actions. Thus, for the long -term investor, it is better to buy a stock when the evaluation seems reasonable rather than trying to wait for the lowest level.

It is very difficult to timer the market, and if you try, you can miss opportunities (and spend too much time starting with your computer screen). It is important to note that NVIDIA increased higher after the past period periods of death – more than 85% in the 18 months following the cross of death 2022 and approximately 140% in the two years following the 2018 event.

Why Nvidia could win

All this means that it is best to put aside concerns about potential short -term models and focus on the prospects of a business in the coming years. In this case, Nvidia offers us many reasons to be enthusiastic about what will happen.

The company is The chief of the chip aiAnd its accent on innovation should continue to continue. And NVIDIA generates not only out -of -competition income, but it also does so at a high level of profitability – with a gross margin of more than 70% per quarter. Given these points, exchanging 25 times Extreme profits estimates Decreasing compared to 50 earlier this year, Nvidia’s stock seems very reasonable at a very reasonable price today.

Thus, even if history suggests that Nvidia’s negative impetus could continue, informed investors can use it as an opportunity to enter action at a good price – so keep and potentially win in the long term.