Key Insights
- Nvidia stock price has pulled back in the past few days.
- China plans to spend over $295 billion in data center buildup.
- OpenAI finally filed for its mega initial public offering.
Nvidia stock price remains in a deep sell-off this month. After soaring to a record high of $236 on May 11, it retreated to $208 on Monday.
Still, this retreat could be a good opportunity as China launched a $295 billion plan to invest in domestic AI capabilities. It may also benefit from the new OpenAI IPO filing.
Nvidia Stock May Benefit From China AI Buildup
A Bloomberg report says that China is considering a massive investment in the AI industry in the coming five years. Beijing plans to spend about 2 trillion yuan ($295 billion) in this period.
It will build data centers and invest in local companies. It’s a move aimed at passing the United States in an industry that officials believe is a game-changer.
The report also noted that these funds will be deployed by state-owned enterprises. The name includes China Mobile and China Telecom, which will operate most of the data centers.
Bloomberg also reports that the plan will be to use domestic producers of semiconductors for this activity. Companies like Huawei, Cambricon, and MetaX will provide most of the chips needed to power this rollout.
However, there is a possibility that Beijing will use some Nvidia chips in these data centers. Besides, the US administration has already allowed ten Chinese companies, such as ByteDance, Tencent, and Alibaba. Such a move would lead to higher revenues for Nvidia in the coming years.
OpenAI Has Filed for an IPO
The next main catalyst for the Nvidia stock price is that OpenAI has now filed for an IPO. This happened a few months after it invested $30 billion in it. This investment valued OpenAI at over $850 billion, making it one of the biggest startups in the United States.
This OpenAI IPO will benefit Nvidia stock in two main ways. First, a surge in the stock price will likely benefit its investors. Some analysts on Polymarket believe that the valuation will likely jump to over $2 trillion over time. That would mark a more than 100% return on investment (RoI).
The other way is that OpenAI will raise capital that it will use for its capital expenditure. Some of this cash will eventually go directly or indirectly to Nvidia, the biggest chipmaker in the world.
Meanwhile, the company has finally landed Apple as a customer. In a statement on Monday, Apple said that it will leverage Nvidia and Google for its AI ambitions that have trailed other big tech companies for years.
NVDA Shares Have More Catalysts
There are signs that the NVDA stock price has more catalysts that may drive it higher in the coming years. It has become highly undervalued despite having a $5 trillion market cap.
The stock trades with a forward price-to-earnings ratio of 23, lower than the sector median of 25. Its five-year average is a whopping 44. Despite that, Nvidia is seeing stronger revenue and profitability growth than it did in the past.
The same is happening with the forward PEG ratio, which stands at 0.29, much lower than that of other companies. At the same time, its revenue is expected to keep growing, potentially crossing the $400 billion mark later this year.
Nvidia Share Price Technical Analysis
The daily chart shows that the NVDA stock price has pulled back in the past few days. It has retreated from a high of $236 in May this year to the current $208.
The stock has already moved slightly below the important support level at $212, the previous all-time high. That is a sign that it has completed the break-and-retest pattern, a common bullish continuation sign. It also sits above the 50-day moving average.
Therefore, the stock will likely resume the uptrend as bulls target the all-time high of $236. A surge above that level will raise the possibility of it rising to over $250.
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