Nvidia rebounds 10% from June low as falling wedge points to breakout

Nvidia Corp. shares climbed 10% from their June low to the highest since June 22, forming a falling wedge pattern that technical analysts say could drive a rally toward the $235 all-time high as the chipmaker's valuation reaches its cheapest levels in years.

"Nvidia's price-to-earnings growth ratio is at decade lows, making the stock a bargain despite its multi-year rally," said analysts at Zacks Investment Research. A discounted cash flow analysis by Simply Wall St. places the stock's fair value at $220, implying about 7.7% upside from current levels.

The chipmaker's revenue surged 85% to $81.6 billion in its most recent fiscal year as hyperscalers including Microsoft Corp. and Amazon.com Inc. continued pouring capital into AI infrastructure. Analysts expect revenue to have climbed 96.2% in the most recent quarter to $91.75 billion, with annual revenue on track to reach $400 billion. Nvidia has also expanded into the CPU market, projecting that business will exceed $20 billion this year.

The company's forward P/E of 22 is roughly half its five-year average of 43, while the PEG ratio of 0.50 is less than a third of the five-year average of 1.46. Nvidia boosted its share repurchase authorization by $80 billion in its last earnings report, reducing outstanding shares to 24.2 billion from 24.3 billion in 2023. The buyback program, combined with the cheap valuation, could tighten the float and provide additional support for the stock price.

The bullish case faces risks from rising client competition. OpenAI has developed its own chip with Broadcom Inc., Alphabet Inc.'s Google is expanding production of its tensor processing units, and both Microsoft and Amazon are building custom silicon. If hyperscalers shift procurement from Nvidia's GPUs to in-house alternatives, the company's growth rate could decelerate even as revenue continues rising. Data center projects worth $64 billion have been canceled, and New York became the first state to impose a moratorium on new data centers, raising questions about the sustainability of AI infrastructure buildout.

The stock's recovery comes as the broader market digests the impact of recent geopolitical events and trade policy. The S&P 500 has followed a pattern similar to 2025, correcting early in the year before staging a V-shaped recovery, according to Zacks Investment Research.

Technical Setup Points Higher

The stock found support at its 200-day exponential moving average and has broken above the upper boundary of a falling wedge pattern, a formation that typically resolves upward. If the pattern plays out, the next target is the all-time high of $235, with a potential extension to $300. Nvidia shares have underperformed the Nasdaq 100 this year, rising about 10% versus the index's 15.7% gain, which has contributed to the compression in valuation multiples. The stock is trading inside the Ichimoku cloud indicator, a technical measure that often precedes trend changes.

Insider Buying Strengthens the Bullish Case

Tech stock insiders have bought more shares over the past six months than at any point in history, according to Zacks Investment Research. The buying spree suggests executives believe their companies are undervalued, adding a fundamental catalyst to the technical setup. The broader tech sector's forward P/E is also below its 10-year average, indicating that the valuation compression is not unique to Nvidia but reflects a broader market trend. Other AI-related companies such as SanDisk Corp. and Marvell Technology Inc. are also reporting record profits, reinforcing the fundamental strength of the semiconductor cycle.

Competition Threatens the Growth Narrative

Nvidia's dominance in AI training and inference chips faces its most credible challenge yet as major customers develop their own silicon. OpenAI's chip, built with Broadcom, targets inference workloads where Nvidia currently commands premium pricing. Google's sixth-generation TPU is already deployed internally, and Amazon's Trainium chip is gaining traction with cloud customers. The risk is not that Nvidia loses all its business but that its pricing power erodes as alternatives emerge, compressing margins even if revenue continues growing. Micron Technology Inc. is expected to generate more profit this year than it produced over the previous two decades combined, showing that the AI chip boom is broadening beyond Nvidia.

This article is for informational purposes only and does not constitute investment advice.