NVDA is a buy; technicals indicate an imminent breakout supported by strong FCF forecasts and a $150B buyback.

Nvidia's looks like it wants to I should let me phrase this let me phrase this correctly. Nvidia looks like it wants to break out.

A couple of things struck me about the recent trading and activity in uh Nvidia. So, I'm just going to narrate what I see here. This is a stock that had a massive runup in May when all of its customers, the hyperscalers were reporting not only earnings but forward guidance and their capex plans.

And basically they ratified what we all already know which is that not only are they spending this coming quarter and for the rest of the year, but as far as the eye can see because the investments they've already made demand that they continue to spend.

Um Nvidia although there are other chips available for data centers there are other components there are AS6 there are CPUs um the GPU clusters are still going to be the the workh horses for the data centers for as far as the I can see.

And uh back to the chart. So basically uh it ran up in May as those reports were coming out and then we sort of had like uh I think a pretty orderly pullback um to the 200 day moving average which at that time was 199200 bounced off of that level twice.

Came right back into the 200s and then has been biting its time pretty much consolidating below that 235 breakout level.

Today the the stock closed around 228 and um the more the longer it knocks on that 230 235 breakout level the longer that testing process takes place the more powerful I think the eventual breakout would be

just at a glance what are your thoughts on the technicals for Nvidia >> so when I look at the chart I see an ascending 50-day moving average ascending 200 day moving average we dipped right below the 50-day and surged right back up after uh Muse came out and you know shocked the Yeah. immediately and I think it's a great price reaction to that news and obviously we'll talk about the buyback and we'll get into that and what that means for the stock.

I have thoughts there but just purely on the chart if you hid the name this is a buy to me.

Yeah. Last thing on the chart, that bottom pane is relative strength, RSI, and we're not going to get into like the calculation that goes into it, but effectively what we're looking at is momentum for the stock uh relative.

And you know, people it's it's not science like people have this shortorthhand where they're like, okay, 60s is perfect. When you have a stock making a new high, you want relative strength to be at least in the 60s, which tells you like momentum is confirming the move.

And then people think about 70 plus as sort of overbought like like it's a technical term. It's not overbought like oh I feel like it went up too much. They will look at a momentum reading at 72 74 76 and say okay not a great entry point. This thing has to cool off.

We're at 58. Like I don't I can't think of a bet if in fact this stock is going to make a new high. I can't think of a better momentum reading to go along with that than an RSI moving from the high 50s into the 60s.

It just gives you so much space for for that eventual breakout to take place.

Yeah, I'm following you. And I'm looking at the volume, too. It's not like it's a super low volume move. Um I'm always looking at RSI divergence. So when the stock is making a high and the RSI is not making a high, that is always something that I'm looking to see.

Oh, hold on a second. Why isn't m uh, you know, momentum confirming the move. But here, you know, you see a lot of relative strength in the name. Um, again, purely based just on the chart, it looks like it's ready.

Yeah. And we don't have that divergence. We have confirmation. and at a new high if we can get uh RSI coming along for the ride, which obviously would would probably happen if it really breaks out with conviction.

Like that's what technicians are waiting for. They're looking for those uh moments.

I also want to show a 10-year chart, Matt. >> So, like this is just price and I pulled out there's no volume, there's no moving averages, there's no [ __ ] This is like so people are like, "Oh, Nvidia's boring or um you know the stock doesn't like poking the meme where you're poking it with a stick do something."

Guys, this like split adjusted. This was a $10 stock at the beginning of 2023. It's 228. Like relax. Give it give it a minute.

Right. Right. And the insane thing is that if I charted the 4P ratio on top of this, it would literally be making 2016 lows. And I know we could we could talk about uh forward earnings and the estimates being wrong and we can speculate on that, but I went back and looked the actual forward earnings tend to be very close to the actuals and it's not my opinion. You know, it just is what it is.

This is a this is a company that um this fiscal year is going to do something like 96 or 98 billion in free cash flow. Next year it could be $360 billion in free cash flow on $680 billion in revenue. um ba again not just based on the company's own guidance but like based on the capex plans and Nvidia's share of of that capex spend that we're getting from 50 other sources

and you think about you think about a company that is uh growing earnings at this rate it would be shocking if the earnings multiple were going up if it were flat it would be understandable it's actually plunging the the the multiple on the earnings.

>> Yeah. All right, guys. So, Nvidia announced an $150 billion buyback. Okay. Jensen dropped this like two weeks after Daario came out and said to slow the pace. So, like, lol, he essentially turned around and said, I'll do the opposite.

And so, let's just All right. So, there's some assumptions baked in here, but let's just say Nvidia's price stays flat for the next year and a half. Okay, I got to make it simple when I'm doing the chart.

So, it stays flat. Okay, if you take $150 billion and you add the $85 billion that it already has in its buyback plan, you get $235 billion of buybacks through Q1 2028. So that would theoretically reduce the shares by 4.3%.

And I guess we could we could chart off like if you just went down the laundry list of things that you would want to see as an Nvidia bowl, as a market bull, as an AI bowl. I think at the top would be the most important CEO in the world at the most important company in the world saying screw slowing.

Let's buy back $150 billion of stock. I'm not going to go speculate buying a company. Let's use the capital to to reduce our share count.

>> Right. So most important CEO I think is accurate at the present moment. There's nobody more important. And also but he's not important than hiding in a bunker. This guy is literally everywhere.

He's popping on podcasts. Like he's he I I saw the seating chart for the AI dinner or meeting or whatever it was at the White House. He was next to Trump. Like think about all the people that were there that theoretically could have been next to Trump. It's Jensen one,

>> right? And he knows how to manage the relationship. It's like how Tim Cook was, you know, he knows what he's doing. And I think that it's overall you want the administration on your side.

It's like a It's like a double thumbs up. You need that.

>> Yeah. He's uh he's a on top of being a genius and out innovating everyone and seeing the uh machine learning trend turn into augmented reality turn into virtual reality turn into oh wait actually we should be using these for um um LLMs and AI like having done all of that in his time since founding the company uh nobody I don't think people should be secondguessing his instincts his public statements ments scrutinizing his capital allocation.

Um, one of the big things is like, oh, Nvidia is like giving money to their customers and then the customers are turning around and buying more chips with that. It's what do you want him to do?

Did you hear the number I just trotted out? $360 billion in cash flow potentially over the over the next year. You You want him to throw pizza parties for his employees? like what what you want him to buy back $500 billion worth of stock between now and 2030.

I mean, he might it's it's it's possible if margins hold up and and revenue continues to grow, but like he's supposed to be making these investments into the ecosystem.

>> Well, and Georg D in the chat is saying now he sucks up to the orange man. It's not about that. It's what's best for the shareholders, right? He needs legislation on his side to do what he wants to do.

And is that something that's baked into the price? Sure. Can that change? Absolutely. But right now, he's managing the relationship well. It's another reason why you want to bet on Jensen. I mean, he's a complete he's a badass.

>> Yeah. It's a sucks up to the orange man or understands that Trump is a mercantalist. So, this is very important actually for the audience. It's not fascism. It's not really capitalism the way the Trump administration thinks about the intersection of government and business.

It's mercantalism. And for any of you who remember social studies uh in high school, mercantalism is a economic system where companies are given a high degree of free reign so long as their aims are in concert with what the government wants.

And obviously the most prominent examples of that are things like the the the Dutch East India Company, um the South Sea Company, and I know some of these didn't end well, but like just this idea of like yes, we're going to allow corporations or what they used to call joint stock companies to pursue their goals of dominating trade around the world and and producing profits for their shareholders.

But um those things have to work handinhand with what the government wants. In the case of the Trump administration, they want massive GDP growth. They want to onshore industries that are currently um manufacturing or hosting their facilities outside of the United States.

They want the first uh hiring inclination to be toward hiring people right here at home rather than somewhere else. Like that's that's the aim of the Trump administration and Bessant and like all of their policies.

And so Jensen has found a way like Tim Cook before him to ingratiate himself with the administration and say, "Okay, I get it. You want to build fabs here. You want to make semiconductors here.

You want um US AI to dominate the world and not Chinese AI. Of course, who wouldn't want that?" Like, "Okay, we can we can do business. We can work that way." That's mercantalism.

That's the the nature of the administration. I'm not telling you it's good, it's bad. I'm just explaining to you the mindset. If you're a shareholder of Nvidia, what do you want?

to [ __ ] be an enemy of of the people who control both houses of Congress, the Supreme Court, the military. Like, are you are are you kidding yourself? Like, this is about making money in today's day and age.

This is how you make money. It'll change. This is where we are.

>> He's aligning with the administration. They want it. Okay? They need it. They need to place jobs in in areas around the country, and he's helping with that.

Nvidia's trailing 12-month operating earnings, okay? Forget the private investments, okay? The operating earnings are now above Apple's. It's legitimate actual earnings. These are not estimates. This happened over the past 12 months.

But how are they going to explain away the macro hedge fund to their clients that they just, you know, slid 10 billion of the 10-year Treasury on their balance sheet when Nvidia just announced a $150 billion buyback?

Meta, Apple, Alphabet, Nvidia, no

Why would I want to own uh Craft Hind company when I could own Nvidia after $150 billion buyback?