In recent years, investors showed their optimism about the future by flocking to high-growth stocks -- and that pushed the prices of some of these players into the stratosphere. The idea was these companies would benefit from a potentially lower interest-rate environment ahead, and, in many cases, the development of artificial intelligence (AI).
And speaking of AI, companies connected to AI in particular stood out, their stocks advancing in the double and triple digits, helping fuel double-digit increases in the Nasdaq in 2023 and 2024. This excitement spilled over into this year, too, driving the tech-heavy benchmark higher through the middle of last month. In recent days, though, the momentum screeched to a halt on concerns about the economy and even the possibility of a recession. What sparked these fears? President Donald Trump launched tariffs on imports from Canada, China, and Mexico -- opening the door to rising prices that could hurt corporate earnings and the customer's wallet.
As a result, benchmarks tumbled, and the Nasdaq even entered correction territory last week, falling more than 10% from its most recent high on Dec. 16. No one likes to see stocks tumble. But one positive thing the movement brings is the opportunity to get in on quality companies at a valuation you never would have believed possible. Looking for an example? This magnificent stock is a rare bargain right now.
A top performer in the AI boom
This particular player has been one of the top performers of the AI boom, posting the biggest gain in the Dow Jones Industrial Average last year and generating double- and triple-digit revenue growth quarter after quarter. The company has built an AI empire and this has translated into a solid leadership position. Which player am I talking about? AI chip giant, Nvidia (NVDA 2.13%).
Image source: Getty Images.
Before we discuss the stock's dirt cheap valuation, let's take a quick look at the story so far. Nvidia makes graphics processing units (GPUs), or the chips that powers crucial AI tasks like the training and inferencing of models. What's key is Nvidia's GPUs are the most powerful around, and as a result, the world's biggest tech companies -- from Microsoft to Meta Platforms -- flock to Nvidia for them.
This created surging demand, with it surpassing supply, for Nvidia's latest release -- the Blackwell architecture. So, even though companies had to wait to get their hands on Blackwell, they were willing to do so, knowing that it could supercharge their AI projects.
All of this, as mentioned, has led to soaring revenue at Nvidia, and the recent reporting period is no exception. The company posted triple-digit revenue growth to a record of $130 billion for the 2025 fiscal year that ended Jan. 26, 2025, and in its very first quarter of commercialization, Blackwell brought in $11 billion. Importantly, Nvidia has consistently been very profitable on sales, with gross margin topping 70%.
NASDAQ: NVDA
Key Data Points
Staying ahead of rivals
This is fantastic, but you might wonder why it makes sense to be optimistic about Nvidia moving forward into the next several years. Nvidia is keenly focused on innovation, promising to update its GPUs on an annual basis, and this should make it very tough for rivals to encroach on its territory. This is an internal factor that Nvidia can control to a certain degree.
The external factor is linked to big tech spending on AI, and here, especially in times of economic uncertainty, investors may worry. But tech giants such as Meta and Alphabet, for example, have recently set out plans for tech spending to make it to their AI goals, and this supports the idea for more growth ahead for Nvidia. Even if an economic slowdown delays certain companies' long-term AI projects, it's unlikely it would completely derail them. Companies already are well into these program, and these are programs they are counting on for growth.
All of this means that there's reason to be optimistic about Nvidia's prospects even if the markets are facing headwinds at the moment.
Its cheapest in more than a year
Now, let's talk valuation. Nvidia often traded for more than 48 time forward earnings estimates in recent months, but declines have brought valuation down to a shockingly low level of 23 times earnings estimates. This is the stock's lowest level by this measure in more than a year. And this makes it one of the three cheapest "Magnificent Seven" stocks right now.
NVDA PE Ratio (Forward) data by YCharts
The "Magnificent Seven" are a group of high-profile tech stocks that have driven market gains in recent years, and they've each seen their prices and valuations decline in recent days.
Considering Nvidia's likelihood of staying ahead in the AI market and strong future revenue prospects as the AI boom continues, this magnificent stock is a rare bargain right now, and one to snatch up during the Nasdaq correction.
