As the Nvidia share price falls another 9.5%, is this my time to invest?

12 days ago

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On Tuesday, the stock price of Nvidia (listed as NVDA on NASDAQ) dropped by 9.5% due to a widespread sell-off of US stocks. As a result, its growth since the beginning of the year is now at 124%.

In most people's opinions, that is a significant amount. However, considering the company's fast revenue growth of 122% annually and the earnings per share increasing by 154%, is it possible that the recent decrease in stock price could be a good time to buy?

What's Causing The Stock Drop?

Investors should first ask if Nvidia's business has declined by 9.5%. I believe it has not.

Poor economic data led to a drop in US stocks. The Purchasing Manager's Index (PMI) showed a decrease in manufacturing for the second consecutive month.

Nvidia and other semiconductor companies experienced the biggest decline. There were high hopes for the industry, but the slow economy poses a significant risk to their success.

Do you think this is a major issue? I don't believe so – the PMI data shows that the sector has experienced contraction in 21 out of the last 22 months, and Nvidia's growth has been incredibly impressive.

I believe Nvidia is stronger than many other American businesses. Its clients are wealthy and view it as the essential choice for getting involved in the artificial intelligence (AI) trend.

So in my opinion, the company hasn't decreased in value by 9.5% compared to a few days ago. However, if the stock was priced too high back then, it could still be overvalued now.

Investors now need to consider if Nvidia stocks are worth more than their current price after the recent decrease. This is a more challenging question, in my opinion.

I believe that the success of a company largely hinges on its competitive stance. Two crucial questions come to mind, but they are not easily resolved.

Nvidia's GPUs are essential for developing (creating) large language models (LLMs). However, it is not as obvious to me if they will be necessary for the prediction process (making estimations) once the LLMs are established.

I read somewhere that CPUs (which are less expensive and made by companies such as Intel) could potentially be enough for this task. If that's the case, the high demand for GPUs might decrease.

Another important question is how long the company can continue to stay ahead in the field of accelerated computing. The outlook appears promising for the near future, however, the situation becomes a bit more uncertain as we look further down the road.

With the release of Blackwell, Nvidia appears to have securely held onto their top position for now. However, the rate of advancements in this field is fast, creating a sense of uncertainty for what lies ahead.

Should I Seize This Buying Opportunity?

I believe that metrics such as price-to-earnings (P/E) ratios are not very helpful when evaluating the value of Nvidia shares at the moment. The company's stock has been consistently trading at a high ratio for a while.

The business is doing well, which is causing the price to go up. The important thing to consider now is how long this will continue.

I think this is a challenging task to evaluate accurately. The problems are complex and require specific skills. Without these abilities, investors may be at a high risk.

I haven't invested in Nvidia yet and it's been performing better than anything else in my investment portfolio, which is a missed opportunity for me. However, I believe in sticking to what I'm familiar with, so I will continue to monitor Nvidia from a distance.

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