NVIDIA’s Stellar Q3 Results Spark Mixed Market Reactions

NVIDIA Corp NVDA has given investors plenty of motivation to continue buying its stock. The semiconductor leader, renowned for its powerful graphics processors that support artificial intelligence applications, recently delivered third-quarter financial results that exceeded expectations.

Strong Earnings and Revenue Growth

Management reported earnings per share of 81 cents, surpassing Wall Street’s prediction of 75 cents. This marks the eighth consecutive quarter that NVIDIA has beaten its earnings targets. On the revenue side, NVIDIA generated sales of $35.1 billion, a staggering 94% increase compared to the previous year. This figure also topped analysts’ forecasts of $33.12 billion.

Expert Reactions to NVIDIA’s Performance

Dan Ives, Managing Director at Wedbush Securities, called the chipmaker’s results a “jaw-dropper.” He highlighted the revolutionary impact of AI technology, stating, “This is the fourth revolution playing out in front of our eyes,” during an interview with CNN.

Jim Cramer from CNBC supported the bullish sentiment, emphasizing that “the demand is accelerating because the payoff is so great.” He referenced NVIDIA CEO Jensen Huang’s assertion that customers receive five dollars in benefits for every dollar spent on NVIDIA chips.

Concerns Amidst Positive Signals

However, not all signs show unwavering positivity for NVDA stock. After releasing the Q3 report, shares actually slipped in pre-market trading on November 21. This suggests that with continued strong performance, increasing expectations could pose challenges for the company.

A notable decline occurred on Friday when NVDA stock dropped over 3%. During that session, options trading showed significant bearish activity, raising concerns that some investors might be losing confidence in NVIDIA’s continued success.

Investment Options from Direxion ETFs

For those looking to invest tactically, Direxion offers two opposite exchange-traded funds. Bullish investors might consider the Direxion Daily NVDA Bull 2X Shares NVDU, designed to achieve daily investment results of 200% of NVDA stock’s performance.

Conversely, bearish investors might prefer the Direxion Daily NVDA Bear 1X Shares NVDD. This fund aims to replicate 100% of the inverse performance of NVDA stock. It’s important to note that both leveraged and inverse ETFs are typically intended for short-term holding, as extending exposure could lead to value erosion due to daily compounding effects.

An In-Depth Look at NVDU and NVDD Performance

The NVDU ETF has seen remarkable returns, up over 359% since the start of the year, reflecting NVIDIA’s impressive results. However, some signs of investor uncertainty have emerged:

• In the last month, NVDU only gained just over 1%, indicating hesitation among investors about the AI sector.
• The bull fund remains well above its 200-day moving average but is approaching its 50-day moving average, which could necessitate attention from investors.

The NVDD ETF has faced considerable challenges this year, plummeting nearly 73% since January, but signs of a shift may be on the horizon:

• Recent price action has brought the inverse fund closer to its 20-day exponential moving average, making the 50-day moving average a realistic target.
• NVDD has experienced a surge in trading volume since mid-November, suggesting changing market sentiment towards AI.

Featured image by Nana Dua from Pixabay.