Nvidia stock outlook: Earnings season puts AI trade to the test
Nvidia remains the leading barometer of investor sentiment toward the AI sector. However, the start of the U.S. earnings season and rising geopolitical risks are making investors increasingly cautious.
The U.S. earnings season begins this week, with the AI sector expected to be the primary focus for investors. Following a strong first quarter, market expectations remain exceptionally high. Investors want to see not only continued revenue growth but also evidence that the massive AI infrastructure spending by major technology companies, including Nvidia, is translating into accelerating earnings growth.
Another source of uncertainty is the renewed escalation in the Middle East, which has pushed oil prices higher. Rising energy prices could fuel inflationary pressures and increase the likelihood that the Federal Reserve maintains a more restrictive monetary policy for longer.
$209.50 becomes the key level for Nvidia
The technical scenario has unfolded as expected. Nvidia shares successfully broke above the key $204.60 resistance level and reached the next liquidity zone between $210 and $212.
However, given the current geopolitical backdrop and its impact on overall market sentiment, the sustainability of the rally remains uncertain.
In pre-market trading, Nvidia shares are already trading below the 50-day simple moving average (SMA) near $209.50. If the stock opens the regular trading session below this level, a pullback toward $204.60 becomes the more likely short-term scenario.
Nvidia remains the leader of the AI trade
Despite increasing macroeconomic and geopolitical headwinds, Nvidia's long-term investment case remains intact.
The company continues to be the primary beneficiary of global AI infrastructure spending, while the upcoming earnings season is likely to become the first major test of whether the AI investment theme can continue to support elevated market valuations.
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