Nvidia is tanking on earnings, but one trader is buying the dip

Shares of chipmaker Nvidia tumbled 6 percent in extended trading Thursday after the company posted weaker-than-expected guidance.

Its stock has had a hot run in 2018, rising 34 percent. But rather than run from the weakness, some traders view the sell-off as an opportunity to buy.

"This thing broke out extremely strongly last May and we've seen a trend line hold all the way up and I'm looking for a retest of that trend line as a buying opportunity," said Bill Baruch, president of Blue Line Futures, Thursday on CNBC's "Trading Nation."

Nvidia has rallied 149 percent since the beginning of May 2017. A trend line stretching from then to this August places a trend line at around $249.

"I would be looking to buy a pullback at $248 to $250 and I think you're going to see this trend hold and some higher prices to come," added Baruch.

Nvidia shares declined after the bell to below the low-end of Baruch's range. It last traded at $245 in extended hours Thursday evening.

"The trend here is your friend," Baruch added in an email to CNBC after Nvidia posted earnings. "This comes off as a 'buy the rumor, sell the fact' reaction. A lot of hype heading into it which set it up to fail no matter how good it was. I trust the bottom line: both the trend line and the balance sheet."

Mark Tepper, president of Strategic Wealth Partners, is confident in Nvidia's future growth given its presence in a fast-expanding market.

"With Nvidia we're really bullish on gaming and gaming is really the key to their growth as it makes up over 50 percent of their revenue," Tepper told "Trading Nation" on Thursday. "Gaming and esports is going to be a huge market on a going-forward basis."

Global esports revenue is expected to rocket 38 percent higher this year to total $906 million, according to Newzoo data. Industry revenue could balloon to $1.65 billion by 2021. Many high-end gaming PCs and other devices are powered by Nvidia's GeForce graphics processing chip.

Tepper holds Nvidia as an exception to the rest of the chipmaker space.

"In general we are extremely bearish on the semiconductor sector. In fact, of all the sectors we watch it actually has the highest exposure to a trade war with 89 percent of revenues coming from overseas," he added.

Nvidia generates a large portion of its revenue internationally. The U.S. makes up just 13 percent of its total sales.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's Closing Bell (M-F, 3PM-5PM ET). In addition, he contributes to CNBC and CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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