This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
If there is one thing that investors really don't like, it's uncertainty. Right now, a host of factors ranging from new tariffs, geopolitical unrest in the Middle East and Europe, economic indicators such as jobless claims -- and even some murmurings of stagflation -- have made investors uneasy.
After soaring to record highs over the last two years, the Nasdaq Composite has turned southward -- and mega-cap tech stocks have sold off in epic fashion. In just the last month, artificial intelligence (AI) darling Nvidia (NASDAQ: NVDA) has lost roughly $600 billion in market value following a 16% drop in its share price.
Could more drops be in store for Nvidia, or is now a lucrative opportunity to take advantage of the market slump and buy the dip?
Nvidia's business looks well-positioned
The direction in which a share price moves and the underlying business fundamentals for a specific business are not always correlated. Although shares of Nvidia have been sliding for several weeks now, the financial profile below shows a pretty compelling picture -- one that underscores the demand for Nvidia's products and services are in demand, and the company is able to fulfill this demand at a highly profitable rate.
NVDA Revenue (Quarterly) data by YCharts
One good way to assess what Nvidia's future could look like is to pay attention to the moves of its customers. Some of Nvidia's largest clients include cloud hyperscalers Microsoft, Alphabet, and Amazon, as well as another "Magnificent Seven" member, Meta Platforms.
Each of these companies recently reported earnings for the full calendar year 2024. During their respective earnings calls, investors learned that these AI behemoths are gearing up to spend north of $320 billion on AI infrastructure at the high end of their guidance this year.
Considering that competition in the data center GPU market is still limited, I think it's highly likely that Nvidia will benefit greatly from rising capital expenditures (capex) among its largest existing customers.
Nvidia's pipeline looks incredible
Over the past year, investors have been peppered with talking points about Nvidia's next-generation GPU architecture, Blackwell. Well, Blackwell is finally here, and its initial results did not disappoint. During the fourth quarter, revenue from Blackwell came in at $11 billion -- which was above management's internal estimates, according to Nvidia CFO Colette Kress.
While Blackwell is expected to be Nvidia's latest growth engine in the near term, the company is already working on a line of new products that should not be overlooked.
Just a few days ago, Nvidia CEO Jensen Huang took the stage at the company's high-profile GTC conference. In addition to Blackwell, Huang showcased a lineup of successor architectures dubbed Blackwell Ultra, Rubin, and Rubin Ultra. Over the next couple of years, Nvidia is expected to continue releasing refined versions of its already market-leading GPUs.
In my eyes, the spending forecasts from big tech that I referenced above indicate that AI remains a top priority, and I think that supports Nvidia's efforts to double down on research and development (R&D) and continue innovating at light speed.
Is Nvidia stock a good buy right now?
The chart below illustrates Nvidia's price-to-earnings (P/E) multiple over the last several years. At a P/E of roughly 40, Nvidia stock is actually trading close to its cheapest valuation on a P/E basis in five years.
NVDA PE Ratio data by YCharts
The AI revolution has not just served as a bellwether for Nvidia -- it represented a transformative shift in the company's operation from primarily a business focused on gaming to one that is now fueling myriad applications across the AI realm for the world's largest companies.
While a cratering stock price may give the appearance of a bearish narrative, the trends analyzed in this piece suggest that Nvidia's future prospects look incredibly bright. Shares appear to be trading for a bargain compared to historical valuation levels, making the ongoing sell-off stock a terrific opportunity to double down and buy the dip in Nvidia stock.
This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
