NVIDIA: Stock price fluctuates at a high level with overvaluation; short-term pullback risk may exist

According to Zhitong Finance APP, NVIDIA (NVDA.US) is set to release its financial report next week, and the US stock research community is focusing on NVIDIA's stock price trends. NVIDIA has a solid leading position in the AI computing power sector, building a deep moat through performance and ecosystem, with financial performance also showing rapid growth and stability, recently receiving positive news support. However, risks such as intensified competition, geopolitical policy uncertainty, supply chain concerns, and underwhelming developments in the Middle East cannot be ignored. The current valuation is relatively high, reflecting the market's strong confidence in its future profitability, but if performance falls short of expectations, the risk of valuation correction will follow. Recently, the stock price has fluctuated in the range of $130 - $138; if it breaks through the upper Bollinger Band, a new round of upward momentum may be welcomed, but the MACD and KDJ indicators show that short-term correction risks still exist, while the long-term upward trend remains unchanged.

The US stock market has shown some fatigue in recent days, especially with a significant sell-off on May 21, where the S&P 500 ETF-SPDR, Dow Jones Index, and Nasdaq Composite Index closed down by 1.61%, 1.91%, and 1.41%, respectively.

The trigger was mainly due to the weak performance of the latest round of US Treasury auctions, with auction yields significantly higher than market expectations, indicating low investor interest. Additionally, Moody's recently downgraded the US credit rating, which has heightened market concerns about the sustainability of US debt, leading to a decline in Treasury prices and a rise in yields. The market is also worried that tax cuts in the US will increase the fiscal deficit and accelerate the explosion of US debt.

In addition, there are a series of catalysts worth paying attention to that could closely affect market trends, including:

Will US inflation data further slow down, reigniting market expectations for interest rate cuts? Will US monetary policy be subject to political interference from Trump?

After the tariff negotiations enter a 90-day pause, will an agreement be reached? What chemical reactions will geopolitical risks and liquidity fluctuations bring?

Will US corporate earnings meet market expectations, and can tech giants' financial reports support high valuations? Will US stock indices undergo technical adjustments?

The macro environment is complex, and no one can predict exactly how the stock market will move next, but in the coming months, fluctuations and corrections are likely unavoidable. However, from a long-term perspective, the technology sector will still be a major focus of market attention.

Speaking of the technology sector, let's talk about today's focus: NVIDIA. NVIDIA is set to release its financial report next week and has always been one of the most closely watched stocks in the US market, with important trading opportunities around the financial report.

Now, let's discuss the current signals from NVIDIA in terms of fundamentals, technicals, and capital, as well as how to easily deploy related opportunities using options!

Finding trading signals from various information!

To summarize briefly: NVIDIA has a strong moat, facing both challenges and opportunities ahead, with long-term trends in valuation and technicals unchanged but short-term correction risks present. In terms of options, implied volatility has not yet reached peak levels, and both bulls and bears are still in battle, but the large orders on May 21 indicate stronger bullish sentiment Next, let's look at the detailed content.

1. How is the fundamental situation?

From the financial report, there is no need to say much; the past financial performance has been strong. The scale and growth rate of revenue and net profit are quite impressive, mainly driven by the core business of data centers, with a high gross margin, and cash flow and balance sheet also showing relatively robust performance. Looking ahead, the market forecasts for several key financial indicators in Q1 and Q2 of 2026 also show a trend of steady growth.

Although the export of NVIDIA's H20 chips to China is restricted by the United States, which may affect revenue in the Chinese market, coupled with the intensifying competition in the chip industry (from major manufacturers such as AMD, Google, Microsoft, Amazon, as well as domestic companies like Huawei), it brings certain pressure. Nevertheless, NVIDIA remains the leader in AI chips, with its performance and ecosystem advantages creating a significant moat. Recently, there have been many positive news reports:

On one hand, breakthroughs in the Middle Eastern market, collaborating with countries like Saudi Arabia and the UAE to invest in AI infrastructure, may boost the demand for Blackwell chips. NVIDIA's Blackwell architecture chips are also collaborating with AMD to achieve mass production, fully replacing the old Hopper architecture. Additionally, NVIDIA has recently decided to establish a research and development laboratory in China to respond to U.S. sanctions, promising to design AI chips compatible with the Greater China market, potentially completing this by June. Furthermore, Jensen Huang announced today several important developments, including the launch of the next-generation GB300 system and the full production of the personal AI computer DGX Spark.

However, the market also has concerns. There are worries about supply chain risks during the initial mass production phase of Blackwell, concerns that the growth prospects in the Middle East may encounter execution risks, and that NVIDIA's successful experience in large-scale deployment of AI infrastructure in the Middle East may be replicated by other AI infrastructure companies or other large-scale enterprises. Currently, there is a market view that NVIDIA's impressive triple-digit growth rate may further slow down in the fiscal year 2027.

From a valuation perspective, NVIDIA currently has a static price-to-earnings (PE) ratio of 44.83, which, although lower than its historical median, is higher than the industry average (the semiconductor PE is 25 times). The price-to-book ratio and price-to-sales ratio are significantly higher than the industry average.

What signals do the technical, funding, and options indicators show?

As of May 21, $NVIDIA(NVDA.US)$ has recently fluctuated in the price range of $130 to $138. A short-term support has formed around $130, while there is short-term resistance near $138 The BOLL line shows that the current stock price is between the middle and upper bands, closer to the upper band at 141.551. If it stabilizes, it may usher in a new round of breakthroughs. The MACD indicates that the DIF and DEA lines are converging above the zero axis, with short-term momentum weakening, but the medium to long-term remains in an upward channel. The KDJ line currently shows an overbought signal, reflecting a bearish short-term trend.

In terms of capital, there has been a continuous net outflow in recent days, with a net outflow of $1.7 billion on May 21, likely mainly influenced by short-term profit-taking. However, from the short-selling data, the short-selling ratio on May 21 was 13.49%, below the market average, and the short position ratio has also declined recently, indicating limited pressure from short sellers.

Looking at the options data, the current implied volatility (IV) is 56.23%, which is relatively moderate and has not yet reached a high level. From the perspective of options open interest, options with expiration dates before the end of June show little difference in open interest, indicating a relatively obvious long-short divergence.

To explain a bit more: Generally, in the 3 weeks to 1 day before the earnings report, due to high uncertainty, IV will rise rapidly; after the earnings report is released, IV will drop quickly, resulting in an IV Crush. *An increase in IV reflects the market's expectation that the price volatility of the asset will increase. All else being equal, an increase in IV will lead to an increase in options prices.

Looking at the options anomalies, there were several relatively large trades on May 21 that are worth noting. Overall, the sentiment appears to be bullish, with views on price ranges of $110-160 and a narrower range of $120-145.

The first order is slightly bullish, possibly expecting that NVIDIA will not drop to $120 before 260116. The second order may reflect a recent upward outlook, but believes that after the earnings report, it will not rise to $145. The third transaction of buying Calls and selling Puts shows bullish sentiment. The fourth order may reflect traders' expectations that by 250815, the stock price will not exceed the range of $110-$160. The fifth order expresses bullish sentiment through buying Calls at three different strike prices.

To summarize

NVIDIA's leading position in AI computing power is relatively solid, forming a moat in terms of performance and ecosystem, and its financials remain on a track of rapid growth and stable performance, with recent favorable information. However, there are uncertainties due to intensified competition, export restrictions from geopolitical policies, supply chain risks, and underwhelming developments in the Middle East.

Currently, the valuation is relatively high, reflecting the market's confidence in its future profitability, but if it falls short of expectations, a valuation correction may occur. Recently, the stock price has fluctuated between $130 and $138, and if it breaks through the upper Bollinger Band, a new round of increases may occur. The combination of MACD and KDJ indicates potential short-term correction risks, while the long-term upward trend remains unchanged. There has been recent pressure from capital outflows, possibly due to short-term profit-taking, but current short-selling pressure is limited.

The current options implied volatility (IV) has not yet reached its peak, and there is potential for further increases in IV. The distribution of options open interest shows that both bulls and bears are still trading, but recent unusual options activity indicates relatively bullish sentiment, with traders focusing on the price ranges of $110-$160 and $120-$145