To The Moon

Looking at recent reports, there have been some minor dips and mixed analyst sentiment on $NVIDIA(NVDA)$ ahead of its Q1 FY 2026 earnings (28 May 2025).

Some analysts have trimmed price targets, citing potential revenue loss from China export restrictions or a slightly more tempered view on gross margins for future products.

However, the overall sentiment remains overwhelmingly positive, with a "Strong Buy" consensus from most analysts and very high revenue and EPS growth expectations.

Some analysts expect Nvidia to beat Q1 revenue and EPS consensus, driven by strong demand for Hopper and Blackwell GPUs, and conservative Street estimates.

As the transition for the costly Hopper-to-Blackwell is nearing completion, this signal that profitabiity should also improve. With the tariffs risks receding, the gross margin may surprise. Nvidia valuation remains attractive given robust revenue growth and margin expansion.

What "Irrational Pullback" Means

An "irrational pullback" suggests that the stock's recent decline or underperformance is not fully justified by fundamental changes in the company's business or the broader market.

If we looked at the recent events, Nvidia shares lost more than 40% of their value between February and April amid concerns that moderating AI spending and the Trump administration’s trade policies could weigh on the company's sales. However, the stock has rallied 50% from last month's low amid optimism over new trade deals. 

The first area to watch sits around $130, Wednesday (21 May) closing price have crossed this area, and it may provide overhead resistance near a horizontal line that links a series of peaks and troughs on the chart stretching back to last August.

The bulls’ ability to reclaim this level could see the shares climb to the crucial $150 area. Investors who have averaged into the stock may decide to lock in profits in this region near several peaks that formed on the chart slightly below the stock’s record high, set in early January.

If we looked closely and based on the different pullback trend, I would say that we are seeing thrust increasing on a strong trend, and the dept of pull back in early May is rather flat or decreasing.

Factors That Implies Pullback Happening:

Sentiment-driven selling: The sell-off might be fueled by general market jitters, profit-taking, or exaggerated reactions to minor negative news (e.g., a competitor announcement, minor geopolitical concerns, or even just sector rotation).

Overblown concerns: Specific worries about Nvidia (e.g., China restrictions, competition, or perceived slowdown in AI spend) might be temporarily overemphasized by investors, leading to a disproportionate drop in price.

Temporary weakness: The underlying strong demand for Nvidia's products (especially AI chips) and its leading market position remain intact, making the recent price weakness seem like an anomaly rather than a fundamental problem.

"De-risking" before earnings: Some institutional investors might reduce their exposure to a stock before a highly anticipated earnings report to avoid potential volatility, even if they're fundamentally bullish. This selling pressure can contribute to a temporary dip.

Why it Sets Up a Potential "Blast"

If the pullback was indeed "irrational," it creates a fertile ground for a strong earnings reaction for several reasons:

Lowered Bar (Relatively): While expectations for Nvidia are always high, an "irrational pullback" slightly lowers the immediate performance bar. If the stock has dipped, even a strong meet or a slight beat of expectations, combined with robust guidance, can trigger a significant positive response. Investors might have been more skeptical than the underlying fundamentals warranted.

Reversion to the Mean/Fair Value: If the market's recent sentiment was overly negative, a strong earnings report can quickly correct that. The stock price tends to gravitate back towards its "fair value" based on strong fundamentals, and an irrational pullback provides a wider gap for that upward movement.

Short Squeeze Potential: If the pullback led to an increase in short interest (bets that the stock will go down), a surprisingly good earnings report can trigger a "short squeeze." Short sellers rush to buy back shares to cover their positions, pushing the price up even more rapidly.

Confirmation of Dominance: A blast-out Q1 earnings report would powerfully re-confirm Nvidia's continued dominance in the AI chip market, particularly with the successful ramp-up and demand for Blackwell. This can quell any lingering doubts and bring fresh capital into the stock.

Positive Momentum Rekindled: After an "irrational pullback," a strong earnings report can re-ignite positive momentum, drawing in new buyers who were waiting for a clearer signal or a better entry point.

If we looked at the current price momentum oscillator, it is going strong, and this might be growing and ignite more positive momentum for Nvidia buying.

Summary

If Nvidia can demonstrate that the demand for its latest chips (like Blackwell) is strong enough to easily offset any China-related headwinds and maintain robust margins, then the stock could quickly recover and potentially surge beyond previous highs.

In essence, an "irrational pullback" followed by strong earnings creates a classic "coiled spring" scenario, where pent-up buying interest and a re-evaluation of fundamentals can lead to a significant upward move.

Appreciate if you could share your thoughts in the comment section whether you think Nvidia is setting the stage for a significant upward move after its earnings ignoring the irrational pullback.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.