Monday, October 14, 2024

by Ian Harvey

Read the article below or watch the video

Hi traders, and thank you for joining us to discuss Nvidia Corporation’s (NASDAQ: NVDA) stock, particularly the success of our recent options trade and why it continues to offer strong potential going into the week of October 14, 2024.

Why the Trade Was a Success

Nvidia has been at the forefront of the technology and AI boom, and our October 8th suggestion to buy **NVDA call options for November 2024 with a $130 strike price** was based on strong fundamentals and market conditions. Here's why this trade has proven successful so far:

1. Strong Financial Performance: Nvidia has reported robust financial growth, particularly in its data center segment, which has been a driving force behind its recent market success. The company's year-over-year revenue growth of 122% demonstrates its ability to capture massive demand in AI-driven markets. This momentum alone justified entering the trade.

2. AI Demand and Blackwell Chips: One of the key factors contributing to Nvidia’s success is its Blackwell AI chips, which have seen "insane" demand from major corporations such as Microsoft and Meta. These companies are building massive AI data centers to support advanced applications like ChatGPT, Copilot, and more. With Nvidia securing long-term orders for its AI chips, the company is poised to continue its dominance in this space, supporting higher stock prices.

3. Nvidia’s Valuation Justified: While some may have been cautious due to Nvidia’s higher price-to-earnings ratio, it has proven to be justified by the company’s ability to consistently outperform. Nvidia’s earnings multiples are still lower than its five-year average, and its price/earnings-to-growth (PEG) ratio of 0.14 indicates that the stock remains undervalued when you consider its expected growth.

4. Market Sentiment: Positive analyst ratings and Wall Street’s bullish view on Nvidia’s AI prospects have further fueled investor confidence. Nvidia has consistently attracted buy ratings from analysts, and reports suggest that its new Blackwell AI chips alone will bring in $7 billion in revenue in Q4 2024. These combined factors made the original options trade not only successful but supported by solid market fundamentals.

Why Nvidia Still Presents a Good Potential Trade for the Week of October 14, 2024

Looking forward, Nvidia continues to present a strong opportunity for investors, particularly as we enter the week of October 14, 2024. Here are the key reasons why this trade still holds potential:

1. AI Market Expansion: The AI market is projected to grow at a rapid pace, with Nvidia maintaining 80% to 95% market share in AI chips. Analysts expect Nvidia to ship 55% more AI GPUs in 2025, driven by demand for its Blackwell processors. This will continue to fuel the company's growth, making it a key player in the AI revolution.

2. Improved Supply Chain and Production: Nvidia's key supplier, Taiwan Semiconductor Manufacturing Company (TSMC), has expanded its production capacity, ensuring that Nvidia can meet the increasing demand for its AI GPUs. With TSMC planning to double its advanced packaging capacity, Nvidia is in a strong position to deliver even more chips next year, further supporting revenue growth.

3. Attractive Valuation and Analyst Confidence: Despite Nvidia’s recent price surge, its valuation is still attractive when considering its future earnings potential. Many analysts have revised their revenue forecasts upward for 2025, with an average price target 22% higher than the current price. The stock's PEG ratio and upward revenue revisions further suggest that Nvidia’s valuation is aligned with its potential.

4. Catalysts for the Week: The upcoming week is critical for Nvidia as the AI frenzy continues to drive stock price movements. With AI-related funding pouring into startups and major corporations alike, demand for Nvidia’s chips is unlikely to slow down.

Additionally, Nvidia's partnerships, such as the one with Foxconn to build the world’s largest supercomputer, will further diversify its revenue streams and reduce geopolitical risks.

In summary, the Nvidia options trade we entered has already proven successful due to the company's financial strength, market leadership in AI, and strong demand for its Blackwell chips.

As we move into the week of October 14, 2024, Nvidia still presents a high-potential trade. AI demand remains robust, Nvidia's supply chain is stronger than ever, and its valuation continues to support further upside.

For traders looking to capitalize on these market trends, maintaining or entering a position in Nvidia options is a strong move, with significant opportunities for profit in the near future.

To learn more, or be a part of our future winning trades, visit weeklyoptionsusa.com

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