COVID-19 Research Looks to Accelerate Demand for Graphics Processors and AI According to This Analyst Upgrade
The Dow saw its biggest 1-day percentage move since 1933. While Nvidia Corp (NVDA) isn’t part of the Dow Jones Industrial Average index, it was definitely a market leader today as its share price surged the most in 3 years. NVDA is a semiconductor company that makes visual computing components like graphics processors. The outlook for technology and semiconductors as China shuttered manufacturing for a while has made the outlook for many of these companies difficult. As a result, many semiconductors are 40% or more off their highs.
The reason for the movement, in part, was the upgrade from a Needham analyst, Rajvindra Gill. He said,” During this uncertain time, superior balance sheets remain supreme,” as a rationale for why turned bullish on the company. As part of his report, he also pointed to COVID-19 virus and the need of graphics processors in analyzing a human genome, which can downsize the time it takes to analyze from days to hours. The escalation in the use of higher end graphics processors for use in the medical industry may accelerate the shift to artificial intelligence.
NVDA peaked on February 19 around $315 following its earnings report a few days earlier. The price has since formed a series of lower lows and highs as the price retraced a little over 61.8% of the uptrend from mid-2019 for a nearly 43% decline. The 61.8% retracement level is a typical correction point, and particularly during more difficult times for a company. The fact the price was able to find support at that level and break out on Tuesday, is an indication that the longer-term trend is intact.
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The expected move over the next few weeks is to retest its high of $315.
Option traders could look for a higher probability of a large return through the purchase of a long call vertical. The 17 APR 20 245/255 vertical can be purchased for around $5.25. That gives a max gain of $475 if the stock closes above $475 by expiration for a 90% ROR. Consider closing early if the vertical can be sold for $8 or more.