In just a matter of weeks, tech stocks have gone from stretching to all-time highs to plunging on concerns around tariffs and even a recession.
As of March 11, the Nasdaq Composite (^IXIC +0.23%) has fallen 13.6% from its closing peak on Dec. 17, 2024. The tech-heavy index was hovering around all-time highs as recently as Feb. 19. In Wall Street terms, the Nasdaq is now in a correction, defined as a decline of 10% or more from a recent closing peak.
Understandably, investors were spooked by weakening consumer sentiment reports, chaos surrounding the on-again, off-again tariffs U.S. President Donald Trump has rolled out, and news that key economic bellwethers like Delta Air Lines and other airlines have cut their guidance for the first quarter.
There's a lot of uncertainty in the stock market right now, but seasoned long-term investors know that sell-offs like these can present buying opportunities.
One stock, in particular, has gotten a lot of attention from investors in the AI era. That stock, Nvidia (NVDA +1.03%), has now lost more than any other on a market-cap basis in the recent retreat. The AI chip leader has seen roughly $1 trillion in market value wiped away since its peak earlier this year. This period has included the threat from DeepSeek AI, an underwhelming response to the company's fourth-quarter earnings report, and macro-level concerns around consumer sentiment, global economic growth, and business investment.
Nvidia is now down 27% from its peak earlier this year, setting up a potentially appealing buying opportunity for the fast-growing semiconductor stock. Should investors capitalize on the sell-off or wait until the volatility settles? Let's take a closer look at what to expect from Nvidia stock.
Image source: Getty Images.
The Nvidia setup
While Nvidia has faced some negative headlines this year around DeepSeek and the actual return on investment its customers are getting from AI, the company's growth remains stellar.
In the fourth quarter, its revenue jumped 78% to $39.3 billion. While that was a slower rate than in previous quarters, that's still much faster than any company of its size is growing. Nvidia expects its superior growth rate to continue. It's calling for around $43 billion in revenue in the first quarter, or 65% growth from a year ago.
With numbers like that, investors shouldn't doubt that the near-term outlook for the business remains strong. Nvidia also seems to be in an enviable position for the medium term. Demand for its new Blackwell platform continues to outstrip supply, and the company is ramping up production of the new components faster than it has for any product in its history.
Over the longer term, the company's prospects still seem bright. The race to artificial general intelligence (AGI) seems unlikely to be derailed even by a global recession, and the company's cutting-edge technology is likely to play a role in future innovations that investors can't yet see. The semiconductor sector has boomed over the last decade, and demand for chips that power everything from data centers to appliances to self-driving cars seems almost certain to grow over the next decade.
NASDAQ: NVDA
Key Data Points
Is Nvidia a buy?
Any stock can move lower in the short term, and that's certainly true of Nvidia. The semiconductor sector is cyclical, and the stock is likely to react poorly to signs that the economy is weakening.
However, in addition to its prospects above, Nvidia stock is also surprisingly cheap after the recent pullback. It now trades at a forward price-to-earnings (P/E) ratio of just 24, which is comparable to the S&P 500's forward P/E of 20.7.
Considering that Nvidia doesn't seem to be directly at risk from tariffs or the simmering trade war and that demand for its cutting-edge products continues to soar, the stock looks like a bargain.
Short-term volatility shouldn't dissuade long-term investors from taking advantage of the sell-off in Nvidia shares. Down nearly 30% from its peak, the AI leader looks like an excellent buy right now.
