Although Nvidia Corp (NASDAQ: NVDA) is up over 190% year-to-date, "over the last five months the stock has been relatively flat, leaving bulls and bears at an inflection point," Direxion's Ed Egilinsky says.
This pause in growth signals the stock might be priced to perfection. Some active traders are watching for the next move.
For those who consider the stock's price is perfection and forward expectations are not lofty enough to propel it higher, the Direxion Daily NVDA Bear 1X Shares ETF (NASDAQ: NVDD) offers a way to get profit from any expected correction in the stock.
However, traders who believe the stock will trend higher in the short term, can look to trade the Direxion Daily NVDA Bull 2X Shares ETF (NASDAQ: NVDU).
Potential R&D Spending Not Baked In
While Nvidia remains the barometer for the AI space, Egilinsky stresses the importance of continued innovation to retain its competitive edge in AI chips.
"This could result in a more sizable commitment to their R&D spending that might not be totally baked into current projections," he said.
Geopolitical Tensions, Tariffs Could Impact Future Growth
Beyond its product and performance, Nvidia's future is increasingly shaped by geopolitical risks, particularly the U.S. tariff stance.
"Traders will be waiting for a sign to trade the next move in Semis and for short-term traders that can be either a bullish view or bearish sentiment," Egilinsky said.
The Donald Trump administration's policies on global trade, especially tariffs, could affect Nvidia's revenue from China and its reliance on Taiwan for chip production.
AI Growth Still Promising, But Tariffs Add Uncertainty
Despite these risks, Nvidia's future looks promising, especially with Blackwell shipments ramping up next quarter.
One way to gauge Nvidia's AI growth prospects is by looking at its key customers like Microsoft Corp (NASDAQ: MSFT), Amazon.com Inc (NASDAQ: AMZN), and Meta Platforms Inc (NASDAQ: META).
These tech giants rely heavily on Nvidia's chips to power their cloud platforms, machine learning, and data centers. As these companies expand their AI operations, Nvidia's role in driving this growth could bolster its position in the market, fueling continued demand for its products.
Egilinsky said the excessive demand for Nvidia's products might "send the stock to new all-time highs." Still, the company's ability to navigate geopolitical hurdles will be crucial to sustaining this growth.