by Artificial intelligence shares Nvidia (NVDA) and Arista Networks (ANET) leads the watch list of five stocks near buy points this weekend. In addition to NVDA shares and ANET, the group also includes Data dog (DDOG), whose computer network monitoring software company should get a boost from the adoption of AI.
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Credit card processing giant MasterCard (MA) and DexCom (DXCM), a leader in glucose monitoring systems for diabetes patients, round out the list.
DDOG stocks are part of the flagship IBD 50 list of leading growth stocks, while NVDA is part of the IBD Leaderboard portfolio of elite stocks.
For now, the powerful stock market rally remains intact after Wall Street dodged a potential bullet in Friday’s jobs report. A sharp slump in private sector job growth, which helped counter soaring 10-year Treasury yields, should keep the Fed from panicking about the inflation outlook.
Nvidia and these other stocks have moved sideways in recent days or weeks, largely because the overall market has been restrained since mid-June. So be sure to read IBD’s The Big Picture every day to stay in sync with the market direction and what it means for your trading decisions.
Nvidia stock
NVDA stock is among the top S&P 500 gainers this year, up 191%, thanks in no small part to blockbuster advisories on May 24 as the company meets massive demand for its AI-enabled chip technology.
Nvidia forecast revenue of $11 billion in Q2, up 64% year-over-year, shattering Wall Street’s consensus estimate of $7.2 billion.
NVDA shares rose 24% in the next session and continued to rise. That’s despite news in late June that the Biden administration is moving toward tighter restrictions on AI-enabled chips to China.
But even amid that negative news, NVDA stock held strong. In each of the past three weeks, NVDA stock has risen or fallen by less than 1.5%, etching a tight four-week pattern. That represents a new buying point, as NVDA shares clear the top end of the 439.90 range. Investors may want to use Friday’s high of 432.14 as an early entry.
Still, there could be a more constructive entry for investors as Nvidia carves out a new base and takes some time to process the big gains. A slight pullback to the 21-day exponential average could also provide an opening.
ANET stock
Arista sells computer network switches that speed communication between racks of computer servers packaged in “hyperscale” data centers. In 2022 Facebook parent Meta platforms (META) accounts for 26% of Arista’s sales, while Microsoft (MSFT) chipped in 16%.
ANET shares rose 23.5% in the three sessions per Nvidia’s Q2 guidance. The demand for AI chips is seen as a precursor to the demand for more bandwidth for computer networks.
However, it remains to be seen how fast AI’s impact will be on the network sector.
At a JPMorgan tech conference on May 23, Arista Chief Financial Officer Ita Brennan spoke cautiously about a potential AI boost.
“We’ve deployed some AI use cases, but it’s relatively small. I think we see it as a good underpinning of sort of future momentum and demand, especially from some of the larger hyperscale customers.”
After the late-May gain took ANET stock past a buy point of 171.44, the shares retreated below the 50-day moving average before bouncing. In recent days, ANET stock has found support on its 21-day line. One step up from here, ANET stock could break a trendline running down from the May 30 high and provide an entry point.
The networking giant also has a new base with a buy point of 178.36.
DDOG stock
Datadog operates a monitoring and analytics platform for software developers and IT departments. The company has a partnership with Amazon Web Services, the cloud computing unit of Amazon.nl (AMZN).
While concerns about the slowing growth of cloud computing weigh on Datadog shares in the first half of 2023, the growing AI workload should sustain demand for its services.
DDOG stock has carved out a long 47-week cup-with-handle base. DDOG has a buy point of 103.80, which is the top of the handle touched on June 2. Investors might also see the handle as its own flat base, modestly above a low cleared in early May. On Friday, DDOG shares rose 1% to 98.02, leaving it about 6% shy of a buy zone. Stocks briefly cleared the 100 level that had served as resistance
Mastercard stock
Mastercard and rival Visa (V) show strength at a time when the consumer is slowing and financial stocks are struggling. But as payment processors, they generate transaction costs but are not exposed to deteriorating credit conditions. In addition, the recovery in entertainment and travel is still ongoing, and cross-border transactions are extremely lucrative for credit card processors.
On Friday, MoffettNathanson analyst Lisa Ellis raised her price target for Mastercard from 460 to 490, maintaining her outperform rating. She cited “a long way in the movement of cash from consumer to business, tangible progress in new payment streams,[and]a competitive battle intensified by the pandemic.”
MA shares flirted with a flat-base buy point of 392.20 in recent sessions before closing 1.1% to 388.68 on Friday.
DexCom Shares
DexCom updated its long-term financial guidance on June 23 and now says it expects revenue of $4.6 billion to $5.1 billion for 2025, up from $4 billion to $4.5 billion. That compares to $2.91 billion in 2022.
Shares initially retreated to their 50-day moving average, but found support and claimed a buy point of 126.44, according to an analysis by MarketSmith. DXCM shares fell 0.8% to 126.71, still in a buy zone. DexCom bounced off the 21-day line intraday for the past few sessions.
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