Down 15%, Is Nvidia Stock a Buy Now?

There’s no question that Nvidia (NVDA 3.08%) has been the leader of the artificial intelligence (AI) revolution thus far. The stock jumped by nearly 10 times since the start of 2023, shortly after the launch of ChatGPT.

It rose to become the most valuable company in the world this year, though it has since ceded that position to Apple. Nvidia’s strength was on display in its latest earnings report as the company delivered another round of blowout results. Revenue jumped 94% to $35.1 billion, and adjusted net income doubled to $20 billion, or $0.81 a share.

Nvidia shares peaked after that third-quarter earnings report on Nov. 21 at a share price of $152.89. However, something surprising happened shortly after that. Nvidia stock started to slide even as the broad market continued to gain as investors seemed to believe that the valuation had again become too inflated. As of Dec. 17, less than a month later, the stock is now down 15% from that peak after falling for four straight sessions in a row.

Image source: Nvidia.

What’s behind Nvidia’s slide?

There hasn’t been any significant news that’s caused Nvidia’s slide and no particularly large one-day moves. Perhaps the biggest item was that China opened an anti-monopoly investigation into the company, according to Bloomberg, regarding its 2019 acquisition of Mellanox, which makes networking products for servers and storage equipment.

Concerns about a shift in AI spending away from Nvidia’s core, increased competition, and the reality that AI has still yet to break through at the consumer or end-user level has weighed on the stock.

The stock also pulled back after Broadcom gave strong AI guidance in its fiscal fourth-quarter earnings report last week. While Broadcom doesn’t compete directly with Nvidia, its results, which included 220% AI growth in 2024 and guidance of 65% growth in the first quarter, show that the spoils in the AI race may be finally starting to spread beyond Nvidia.

Investors, especially those sitting on significant profits in Nvidia, may finally be sensing that it’s time to diversify into other chip stocks.

Nvidia’s current value proposition

Despite the stock’s pullback after the initial earnings pop, Nvidia’s prospects still look just as strong as they did when the company reported earnings a month ago.

It’s solved the overheating problems that had delayed the launch of the new Blackwell platform and continues to see demand that is vastly outstripping the supply of its new components. CEO Jensen Huang described demand for Hopper and the new Blackwell platform as “incredible,” and CFO Colette Kress said Blackwell demand would exceed supply for several quarters into fiscal 2026, or next calendar year.

Meanwhile, Nvidia’s fourth-quarter guidance calls for business as usual as the company sees revenue of around $37.5 billion, up 70% from the quarter a year ago, reflecting solid sequential growth in the business.

Is Nvidia a buy?

Nvidia’s pullback in recent weeks comes as its competition continues to weaken. Intel pushed CEO Pat Gelsinger into retirement earlier this month, leaving the company without a permanent CEO, a further sign of disarray at the legacy chipmaker. Meanwhile, Advanced Micro Devices cut its guidance in its most recent earnings report.

Both of those companies have launched challengers to Nvidia’s data center GPUs, but they seem unlikely to make a significant dent in Nvidia’s lead, especially as Nvidia continues to innovate at a rapid pace. Not only is Blackwell already at full production, but its next platform, Rubin, is already under development.

Looking at it from that perspective, the recent sell-off looks like a buying opportunity for Nvidia. Its growth prospects remain just as strong as they were a month ago. The competitive threat seems to have weakened, and investors are generally bullish on 2025 as AI is expected to expand into software and hopes are high that the Trump administration will lower regulations.

Nvidia now trades at a forward price-to-earnings ratio of 44 based on this year’s consensus, which looks like a great price for a company growing as fast as it is. Nvidia continues to strengthen its competitive advantages, and while its growth should continue to moderate, its valuation leaves room for continued gains. The stock still looks like a buy, especially after the post-earnings pullback.