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

The value of Nvidia stock dropped by 9.5% on Tuesday, September 3rd, due to a general decrease in US stock prices. This means that the stock has only increased by 124% since the beginning of the year.

In simple terms, that's a big amount. However, considering the company's rapid revenue growth of 122% annually and a substantial increase in earnings per share at 154%, one might wonder if the recent decrease in stock price could be a good chance to buy.

What's Causing The Drop In Stock Prices?

The initial question investors should consider is if Nvidia's business has significantly worsened by 9.5% since the decline. In my opinion, it hasn't.

Poor economic numbers led to a drop in US stocks. The Purchasing Manager's Index (PMI) showed a second consecutive month of decline in the manufacturing sector.

Nvidia, as well as other semiconductor companies, saw the biggest decline. There were high hopes for the industry, but the slow economy poses a risk.

Do you think this is a major issue? I don't think so - the PMI data shows that the industry has been shrinking for 21 out of the last 22 months and Nvidia's growth has been incredibly impressive.

I believe that Nvidia is stronger than many other American companies. Its customers are financially stable and view it as essential for taking part in the artificial intelligence (AI) movement.

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

Investors are now wondering if Nvidia stocks are being sold for too little money after they recently went down. In my opinion, this is a more challenging question.

I believe the company's success is heavily influenced by its competitive standing. There are two challenging questions that come to mind when considering this.

Nvidia's GPUs are essential for building complex language models, but I'm not sure if they will be necessary for making predictions once the models are established.

Some people have mentioned that CPUs, which are less expensive and made by companies like Intel, could be enough for this. If that turns out to be true, the high demand for GPUs may decrease.

Another important question is how long the company can continue to lead in fast computing. The outlook seems good for now, but the future is a bit uncertain.

Nvidia has managed to stay ahead with the release of Blackwell, but in the fast-paced world of technology, the future remains unpredictable due to rapid advancements in the industry.

Should I Seize This Buying Chance?

I believe that using metrics such as price-to-earnings (P/E) ratios may not be very helpful in evaluating the value of Nvidia shares at the moment. The stock has consistently been trading at a high ratio for quite a while.

The successful results from the core business have pushed the price up. The main concern now is: how much longer will this continue?

I feel unsure about evaluating this one confidently because it is quite challenging. The technical and complex nature of the issues involved poses a high level of risk for investors without the necessary skills.

I have not invested in Nvidia yet and it has performed better than any other stock in my portfolio – unfortunately for me. However, I believe it's important to stick to investments that I understand well, so for now, I will continue to monitor Nvidia.

The blog post titled "Is now the right time for me to invest as Nvidia's stock price drops by 9.5%?" was published on The Motley Fool UK website.

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Stephen Wright does not own any of the stocks discussed. The Motley Fool UK has endorsed Nvidia. The opinions expressed about the companies in this article belong to the author and may not align with the recommendations from our subscription services like Share Advisor, Hidden Winners, and Pro. At The Motley Fool, we think that having a variety of perspectives helps us become smarter investors.

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