Can This AI Stock Keep Driving the Market Higher?

Key Points

• NVIDIA stock is up more than 160% in 2024, continuing its run as one of the best-performing stocks in 2024.
• The bullish case stems from growing demand for generative AI applications, but institutional investors may reallocate capital when interest rates move lower.
• NVDA stock remains a solid long-term investment but could be a tricky short-term trade.  

NVIDIA Corp. NASDAQ: NVDA continues to be one of the best-performing stocks in 2024. At a split-adjusted price of $129.71, NVDA stock is up 160% in 2024. However, NVIDIA’s coattails appear to be fairly short. The market growth is limited to a relatively narrow range of stocks, mostly in large-cap technology stocks.  

There are two concerns. First, how long can NVIDIA drive the market higher? And second, is NVIDIA a buy at its current price? 

NVIDIA and the Generative AI Demand Surge

It’s impossible to consider how long NVIDIA can drive the market without putting that into the context of the artificial intelligence (AI) revolution. A significant portion of NVIDIA’s revenue comes from four Magnificent 7 stocks – specifically Microsoft Corp. NASDAQ: MSFT, Meta Platforms Inc. NASDAQ: META, Amazon.com Inc. NASDAQ: AMZN, and Alphabet Inc. NASDAQ: GOOGL. These companies have committed to spending billions to build their AI infrastructures. NVIDIA is also a key supplier to companies that are building out data centers.  

The long-term problem is that many of these companies are looking to expand their AI capabilities, making them less reliant on NVIDIA. Another catalyst that may not occur for several years is that once the data center boom normalizes, it could crimp demand for NVIDIA chips.  

Impact of Lower Interest Rates on NVIDIA's Market Position

Lower interest rates are the macroeconomic issue that could curb NVIDIA’s market superiority. On the one hand, a looser monetary policy could inspire more business investment, which could be bullish for NVDA.  

On the other hand, lower interest rates will make several mid-cap and small-cap stocks that are underperforming the market more attractive to investors. That could lead to institutions broadening their exposure away from technology stocks, specifically NVDA stock.  

Analysts Continue to Bid NVDA Stock Higher 

Investing always requires an element of presumption. However, analyst ratings can help investors understand institutional sentiment about security.  

The NVIDIA analyst forecasts on MarketBeat show that 14 analysts have increased their price targets on NVIDIA in the last 30 days. Rosenblatt Securities issued the most bullish price target, raising its target from $140 to $200. Remember that this bullish sentiment comes after the company's last reported earnings in May and after the stock had completed its split in June.  

Bullish Earnings Potential: Upside and Downside Risks for NVIDIA

Even a great company can be a poor investment if investors overpay for its shares. Investors will have to wait until August 28 before NVIDIA reports earnings, a time to gauge the company’s momentum.  

The upside risk for investors is that a bullish earnings report could send the stock soaring. On the other hand, the downside risk is that the company only needs to deliver an “as expected” or slightly higher report to disappoint investors. That could send the stock tumbling.  

Arguably, that would be a buying opportunity. However, most investors are exposed to NVIDIA either because they own the stock as one of their individual holdings or as part of an exchange-traded fund (ETF) or mutual fund. That alone makes it a solid long-term hold.  

If you’re looking to trade NVDA stock, be aware that it’s possible for NVDA stock to chop around at or around its current level until earnings. Supporting that choppy price movement, the stock is forming a potential triple-top resistance between $134.50 and 135. However, the stock has already pushed past this pattern once, and NVIDIA is trading well above its 200-day simple moving average, which is generally bullish.