Surge Ahead! NVIDIA Soars Over 80% After Overheating Alarm Sounds
NVIDIA's stock price surged over 80% in a short period, but the market has shown signs of overheating. The 14-day Relative Strength Index (RSI) has broken above 80, and analysts warn to remain vigilant. Despite facing overbought risks, NVIDIA's stock price has been driven up by the approval from the U.S. government to resume sales of certain AI chips in China. Since April, NVIDIA's market capitalization has increased by approximately $1.9 trillion, firmly maintaining its position as the world's largest publicly traded company by market value
According to Zhitong Finance APP, although investors in NVIDIA (NVDA.US) continue to find reasons to increase their holdings in the stock, this rapid upward trend has shown signs of overheating.
On Thursday, the chip manufacturer's 14-day Relative Strength Index (RSI) briefly broke through the 80 mark, reaching its peak since June 2024—when the stock subsequently plummeted over 20% in the following six weeks. This momentum indicator tracks the speed of recent price fluctuations, and when the reading exceeds 70, some analysts view it as a signal of overbought conditions.
Jonathan Krinsky, Chief Market Technician at BTIG, stated, "The overbought situation is very evident, and while this does not mean a reversal is imminent, it does require vigilance. Market sentiment is shifting from optimism to a state close to euphoria."
This company, which dominates the artificial intelligence (AI) computing chip market, has staged an astonishing turnaround since April. At that time, widespread selling triggered by tariffs intensified concerns about potential cuts in AI spending, but subsequently, its major clients continued to ramp up investments in AI service research and development, driving the stock price up by 83% in less than four months.
The latest round of gains stems from NVIDIA receiving U.S. government approval to resume sales of certain AI chips in China. Bloomberg Intelligence analyst Kunjan Sobhani pointed out that this policy shift is expected to recover $15 billion in revenue at risk in NVIDIA's data center business for fiscal year 2026 due to chip export controls.
This week, the Trump administration also announced over $92 billion in commitments for AI and energy infrastructure investments, while Meta (META.US) CEO Mark Zuckerberg confirmed plans to invest "hundreds of billions" in building data centers. According to compiled supply chain data, this Facebook parent company is NVIDIA's second-largest customer, following Microsoft (MSFT.US).
Currently, NVIDIA is on track for its eighth consecutive week of gains, with its surge since the April low increasing its market capitalization by approximately $1.9 trillion—an amount that exceeds Meta's total market value. Its current market capitalization of $4.2 trillion firmly places it at the top of the global publicly traded companies list, about $400 billion higher than second-place Microsoft.
James Abate, Managing Director and Head of Fundamental Strategy at Horizon Investments, stated, "Momentum is clearly continuing, and every time there is positive news, buyers rush in to push the stock price higher." Nevertheless, Abate has reduced some of his NVIDIA holdings during the rally, expressing concerns not only about valuation factors but also about the market underestimating the potential cyclical fluctuations in "AI business" in the future.
Currently, NVIDIA's dynamic price-to-earnings ratio is 34 times, which, although higher than the 20 times low in April, is still below the average level of about 40 times over the past five years.
Given the increasing positive signals for AI demand (including TSMC's (TSM.US) strong outlook released on Thursday), most institutions on Wall Street remain optimistic, with only 1 of the 79 analysts covering the stock giving a "sell" rating and 9 giving a "neutral" rating Investors are closely watching the upcoming earnings reports from tech giants to assess capital expenditure trends. Google (GOOGL.US) is set to release its earnings report on July 23 local time, followed by Microsoft and Meta on July 30. It is understood that these three companies, along with Amazon (AMZN.US), collectively contributed over 40% of NVIDIA's revenue, and NVIDIA's earnings report will be released at the end of August.
Rhys Williams, Chief Strategist at Wayve Capital Management, believes that there is no need to take profits in the context of sustained positive AI spending. "NVIDIA has achieved an effective breakthrough, and we expect it to deliver an impressive quarterly report and raise its guidance, with data center growth likely to maintain a strong cycle for at least another year or two."
