What’s Fueling the Rally, How High Could It Go?

NVIDIA’s NASDAQ: NVDA stock price is melting up and can extend the move to lofty levels. While little has been confirmed, easing trade tensions with China, reduced semiconductor restrictions on Arab nations, and improving economic conditions point to an improved outlook for sales and market sentiment. Up 50% from the April low to the mid-May highs, this undervalued stock could add another 25% to its share price by summer and continue trending higher as the year progresses. 

The latest news is that NVIDIA will provide Saudi Arabia’s Humain with hundreds of thousands of its most advanced semiconductors. The deal is slated to run over five years and lead to nearly two gigawatts of data center capacity by 2030. The first will link 18,000 Grace Blackwell GPUs in a supercomputer for Saudi Arabia’s people and businesses. Humain was launched in preparation for the announcement and is owned by Saudi Arabia’s Public Investment Fund (PIF). 

There Is a Catalyst for Higher Share Prices in NVIDIA’s Upcoming Guidance

NVIDIA is scheduled to report at the end of this month and will likely provide numerous market catalysts. These include potential for outperformance and improved guidance, which were expected to be strong before the Humain announcement and are now amplified by it. Reasons to expect strength include the latest funding news from Perplexity, an AI start-up backed by NVIDIA, which suggests AI spending remains robust. It is reportedly valued at $14 billion, a 55% increase in just under six months.

The impact on NVIDIA’s outlook is significant. Assuming the average cost of Grace Blackwell GPUs is around $65,000, it could cost upward of $3 million per rack and thousands of racks are needed just for the initial order. This scales to billions in additional revenue in F2025 and annually thereafter until 2030, assuming it can meet the increased demand. 

The analysts’ trends for NVIDIA are bullish. Some price target reductions in April and early May provided a headwind that evaporated in the wake of the Saudi news. The likely outcome is that analysts will lift sentiment by increasing revenue, earnings, and stock price estimates, leading this market into a rebound that will move into the high-end range of targets.

That is sufficient for new all-time highs and a solid 50% upside from May trading levels. 

As it is, the consensus reported by MarketBeat forecasts another solid double-digit increase, although growth will slow from last year’s 262% and last quarter’s 77% to about 65%. Other critical details will be the earnings and cash flow, expected to be impacted by export curbs on China, but now offset by Saudi Arabia.

The takeaway will be the nature of charges, which are expected to be mostly non-cash, and the balance sheet health. Details at the end of F2024 included a significant cash build, a net cash position, low leverage, and a rapidly improving outlook for increased capital returns. 

Institutions Buy NVIDIA at Low Prices 

The institutional activity in NVIDIA stock is telling, with them having bought on balance in Q4 2024, Q1 2025, and quarter-to-date in Q2. The net result is an increase in total holdings to about 65% of the stock and a solid support base for the market.

The technical action reflects their buying, the price correction bottoming at critical targets, and will likely continue to move higher ahead of the release. The Saudi news sent price action above the 30-day EMA, where bullish day- and short-term traders are in control. The critical resistance point is near $140 and will likely be tested if not exceeded by the late May reporting date. 

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