NVIDIA makes a triumphant return! The upward momentum is likely hard to stop under multiple favorable conditions

According to Zhitong Finance APP, after several months of silence, NVIDIA (NVDA.US) stock has found its direction again. With concerns about spending by large tech companies easing, the cooling of China-U.S. trade tensions, and the emergence of new chip buyers, NVIDIA has risen over 15% this week and nearly 24% so far this month—on track for its best monthly performance in a year.

Earlier this week, NVIDIA secured a massive order from the Middle East. It is reported that Saudi AI company Humain plans to build an AI factory in Saudi Arabia in collaboration with NVIDIA. Meanwhile, NVIDIA CEO Jensen Huang announced that the company will export 18,000 top-tier AI chips to Saudi Arabia. Additionally, sources revealed that the Trump administration is considering an agreement that would allow the UAE to import over 1 million advanced NVIDIA chips, a quantity far exceeding the restrictions imposed during the Biden administration on AI chip regulations. At the same time, the significant reduction in bilateral tariffs between China and the U.S. has boosted investors' risk appetite, leading to renewed interest in tech stocks, including NVIDIA, after a period of underperformance.

It is worth mentioning that this earnings season also shows that NVIDIA's largest customers are still investing heavily in AI infrastructure-related fields, which is undoubtedly good news for NVIDIA, a leader in this area. When NVIDIA's stock price fell to a low last month, it had dropped 37% from its historical high in January, partly due to concerns that the chip purchasing frenzy among large tech companies was about to cool down. However, large tech companies have not backed down; instead, they are increasing their investments. Microsoft (MSFT.US) and Alphabet (GOOGL.US) have committed to further increasing spending next year, while Meta (META.US) has raised its capital expenditure expectations due to strong momentum in AI-related demand. Together with Amazon (AMZN.US), these four tech giants are expected to reach nearly $330 billion in capital expenditures by 2026, a 6% increase from this year's estimated spending.

Robert Ruggirello, Chief Investment Officer of Brave Eagle Wealth Management, stated, "This earnings season shows that mega-cap companies continue to raise their estimates for capital expenditures, and NVIDIA remains a major beneficiary of these capital expenditures." He added that in terms of AI spending, "I believe we are just entering the early stages of the game."

NVIDIA's recent stock price rebound marks a significant reversal from the worst decline the stock has seen since 2022. Since the beginning of this month, NVIDIA's stock price has surpassed its 50-day and 200-day moving averages, which is a positive technical signal for its recent and long-term momentum. NVIDIA's stock price has risen 43% since its low in April, and the company's market capitalization has increased by $1 trillion during this period, surpassing Apple (AAPL.US) to become the second-highest publicly traded company by market capitalization globally, after Microsoft (MSFT.US).

NVIDIA's recent performance has prompted Bank of America to raise its target price for the stock from $150 to $160, reiterating a "buy" rating. Bank of America analyst Vivek Arya estimates that AI projects in the Middle East could generate up to $5 billion in revenue annually for NVIDIA and its competitor AMD (AMD.US), helping to offset losses caused by restrictions on chip exports to China.

Wall Street is almost unanimously optimistic about NVIDIA, with 87% of analysts tracked by Bloomberg recommending a buy, and the average target price for the stock is 20% higher than the current price level. NVIDIA's implied return ranks second among the "Magnificent Seven" in U.S. stocks, only behind Alphabet.

Additionally, NVIDIA's price-to-earnings ratio relative to expected earnings has rebounded from its lowest point since 2019 but remains below the long-term average. Data shows that the stock's price-to-earnings ratio relative to expected earnings for the next 12 months briefly fell below 20 times but has now risen to 28 times, while the average over the past decade is 35 times.

NVIDIA will announce its first-quarter results for fiscal year 2026 after the U.S. market closes on May 28. The company previously projected first-quarter revenue to reach $43 billion, indicating a year-on-year growth of about 65%. Andre Bakhos, president of Ingenium Analytics, stated, "Owning a growth company like NVIDIA typically comes at a higher cost, but its valuation is not far above the lows of recent years or the overall market level, which speaks to its investment appeal." He added, "Currently, all indicators are favorable for NVIDIA—the technical performance of the stock price, valuation, and growth prospects, especially in new markets being developed in the Middle East. With such robust fundamentals, it is very difficult to break the upward trend."