Nvidia stock forms a diamond reversal pattern ahead of Micron earnings

Nvidia stock price has remained inside a narrow range in the last two weeks. It ended last week at $225, down modestly from the year-to-date high of $236. This consolidation will be put to the test this week when Micron Technology releases its financial results. Also, there are reports that China is prepared to allow top companies to buy new Nvidia chips.

Nvidia Stock to React to Micron Earnings

A key catalyst for Nvidia stock will come out on Wednesday when Micron releases its earnings report. These numbers are important because Micron is one of Nvidia’s biggest suppliers, accounting for a substantial portion of its sales. 

Additionally, Micron is one of the top players in the artificial intelligence industry, where it provides high-bandwidth memory that is essential in data centers. As a result, its numbers will provide hints on whether the industry is growing or not.

Analysts have high expectations about Micron’s earnings, with the average estimate being that its revenue jumped by 0ver 320% in the last quarter. Precisely, analysts see the revenue coming in at over $51 billion, much higher than what the company made in the last financial year. 

The company has also provided an exciting margin guidance, with its target being 86%. As such, there is a possibility that its gross margin will be higher than this. 

China considering allowing top companies to buy Nvidia’s chips

Meanwhile, Nvidia stock is reacting to reports that China was considering allowing domestic companies like Alibaba and ByteDance to buy some of its most advanced chips. The reports came from Reuters, which cited people familiar with the matter. 

According to Reuters, the Ministry of Information Technology has asked these companies to report their plans to buy RTX Pro 5500 chips. Officials believe that the US government will approve the purchases, especially after last week’s meeting between Xi Jinping and President Trump. 

China is one of the biggest markets for GPUs and other technology products. Nvidia has found it hard to do substantial business in the country because of the back-and-forth between the US and China. As a result, the management has avoided adding its Chinese business to its forward guidance. 

Nvidia stock is also reacting to the growing calls for regulating the AI industry. Jensen Huang, its CEO, has become a major opponent of these calls, maintaining that AI companies should self-regulate. 

His opposition is likely because any slowdown in AI spending would have a major impact on its business. Despite all this, analysts believe that the company’s growth has more room to run, with the average estimate being that its annual revenue will jump to $411 billion this year and $682 billion next year.

Nvidia share price technical analysis

NVDA stock chart | Source: TradingView

Technicals suggest that Nvidia’s shares may be on the cusp of a bearish breakout. They have formed a diamond reversal pattern, which often leads to a retreat. 

The MACD indicator has also formed a bearish crossover and is pointing downwards. Also, the Relative Strength Index (RSI) has formed a descending channel. 

Therefore, these patterns mean that the stock may drop in the coming days. If this happens, it may drop to the psychological level of $200. On the other hand, a move above the all-time high of $236 will point to more gains.

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