AI chip demand isn't slowing — ride the momentum on Nvidia and ASML

Verdict: compelling thesis, punishing drawdown — wait for the EMA trigger

The idea's thesis — that Nvidia and ASML simultaneously confirming AI demand validates a hardware-momentum trade — is grounded in real fundamental strength, with NVDA posting 65.5% revenue growth and ASML growing 15.6% year over year. The backtest delivers a positive but modest 12.7% return across 32 trades over 60 months with a 46.9% win rate, yet the 29.4% maximum drawdown and extended underwater stretches from mid-2022 through early 2024 make this a psychologically demanding strategy to hold. No robust parameter setup was established through sensitivity testing, so the published rules stand as fixed inputs rather than validated choices. Right now both names have cleared their RSI and moving-average conditions, but the entry is gated on a fresh EMA reclaim that has not triggered — the setup is live but waiting. **Conviction breakdown:** Thesis support: 72 — both companies genuinely confirm booming AI demand with elite profitability backing the narrative. Trade readiness: 38 — all supporting conditions are met but the gating EMA cross has not fired, and exit levels sit uncomfortably close (NVDA is only $7.59 above its 10-day low). Risk quality: 35 — a 29.4% max drawdown with a sub-50% win rate and coarse daily-bar exit fills make position sizing critical. Backtest evidence: 48 — 32 trades over 60 months is a thin sample, and no parameter optimization was possible. Fundamentals trend: 78 — NVDA's 71.1% gross margin and $96.7B free cash flow rank in the 99th percentile, though margin compression from prior levels warrants monitoring.

Trade now

The strategy needs both NVDA and ASML to flash momentum confirmation at the same time before entering long. The RSI floors are already cleared: NVDA's 14-day RSI sits at 66.7, well above the 50 threshold, and ASML's is at 56.4, also above 50. Both stocks are trading above their 20-day simple moving averages as well — NVDA at $213.77 versus $206.21, and ASML at $1,801.86 versus $1,780.68. The gating condition is the EMA crossover, which requires a fresh cross above the 20-day EMA. Right now both names are already trading above their EMAs — NVDA by roughly $7.75 above $206.02, and ASML by about $20.34 above $1,781.52. Because the rules call for a cross above rather than simply trading above, the trigger still needs a pullback to the EMA followed by a reclaim, or a fresh breakout from current levels. That points to **wait**. Concretely, watch for either stock to dip toward its 20-day EMA and then close back above it on a daily bar, with all other conditions intact. On the exit side, the invalidation levels are clear. If either NVDA or ASML closes below its 10-day low — currently $206.18 for NVDA and $1,778.43 for ASML — the strategy exits both legs. A 10% trailing stop also applies, and a 60-day max hold acts as a time stop. The take-profit trigger fires when either RSI reaches 75; NVDA sits about 8 points away and ASML roughly 19 points away. Over the 60-month backtest window the strategy produced 32 trades with a 46.9% win rate and a 12.7% return, but it endured a 29.4% maximum drawdown — sizing matters here. No robust parameter setup was established through sensitivity testing, so the published rules stand as-is.

Two AI bellwethers confirming the same demand surge

The fundamental case rests on both companies simultaneously validating the AI hardware buildout. Per the Yahoo Finance piece, Nvidia's CEO is forecasting "giant" sales volumes for their next product, and per the Wall Street Journal, ASML is raising guidance again on "unrelenting AI demand." The idea argues that when the top chip designer and the top equipment maker both confirm booming business, it validates a momentum trade on the hardware side of AI. The numbers back the narrative: Nvidia posted 65.5% year-over-year revenue growth on $215.9B in FY revenue, landing in the 71st percentile for growth among Information Technology peers. ASML grew 15.6% to $32.7B — more modest in absolute terms but still above the median for Industrials. Profitability is elite at both companies and trending in the right direction. Nvidia's 71.1% gross margin and 60.4% operating margin place it…

Scores

• Conviction score breakdown: 54
• Thesis support: 72
• Trade readiness: 38
• Risk quality: 35
• Backtest evidence: 48
• Fundamentals trend: 78

Watch items

• NVDA — RSI (14)
• ASML — RSI (14)
• NVDA — Price vs 20-EMA
• ASML — Price vs 20-EMA
• NVDA — Price vs 10-day low
• ASML — Price vs 10-day low
• NVDA — RSI (14) — take profit
• ASML — RSI (14) — take profit
• ASML — RSI (14) above 50
• ASML — Price crossed above EMA (20)
• ASML — Price above SMA (20)