While it's no fun watching your portfolio drop during a stock market sell-off, these things happen occasionally. However, individual stocks (especially high-growth ones) are disproportionately affected, which may cause investors in stocks like Nvidia (NVDA +2.59%) to panic.
I think that's a knee-jerk reaction, and investors need to understand that while Nvidia may see a drop in demand (just like many other companies), there's still an overwhelming tailwind blowing in Nvidia's favor, and now isn't the time to sell; it's time to buy.
NASDAQ: NVDA
Key Data Points
Nvidia's GPUs are in high demand
Nvidia was one of the most dominant stocks in the market from 2023 to 2024. It became the poster child for the AI arms race because it sells graphics processing units (GPUs), which are perfectly suited for tasks that require vast computing power like AI models. Nvidia's clients built up massive data centers, some filled with more than 100,000 GPUs, but that's still not enough.
Some leading AI firms have stated that each iteration of their generative AI model takes increasingly more computing power, which bodes well for Nvidia's future. During Nvidia's 2025 GTC event, CEO Jensen Huang stated that data center capital expenditures are expected to reach $1 trillion by 2028. That's up from 2024's $400 billion mark, and with Nvidia's trailing-12-month revenue totaling $130 billion, it clearly gets a huge cut of that market.
However, that's not the prevailing story with Nvidia's stock; the broader economy is.
Investors are worried that President Donald Trump's tariffs could send the economy into a recession, harming companies like Nvidia. But they're forgetting that some trends (like AI) are bigger than this and can likely survive pressure from the broader economy. Nvidia's largest clients have massive cash flows, and even though those cash flows may decrease slightly due to pressure on the consumer, they're not likely to drop to zero.
The importance of winning the AI arms race (or at least staying competitive) cannot be understated. Generative AI models and the advantages they bring are the biggest technological innovation since the internet, and having a strong AI offering will be key to companies surviving five years from now.
Because I'm focused on the long term (at least five years), I can see through the fears of tomorrow (which are valid). The general direction that Nvidia's business is heading is up and to the right, even if the stock price is going in the opposite direction.
So, if you're worried about Nvidia's stock price over the short term, just remember that you bought Nvidia stock for GPUs, which are powering the long-term rollout of AI.
But if you're a little bolder and not just content with holding Nvidia's stock, right now appears like a fantastic buying opportunity.
Nvidia's stock price is starting to look very attractive
After the market sell-off, Nvidia's stock reached levels that had not been seen in some time.
NVDA PE Ratio (Forward) data by YCharts
This is the lowest price-to-earnings (P/E) ratio Nvidia has traded at since 2023 and the lowest forward P/E it has traded at since the start of 2024. That's notable, because there was extreme pessimism in the market during early 2023, as investors were sure that the economy would plunge into a recession.
If you compare Nvidia's stock to the S&P 500 index, things are looking even better to buy Nvidia's stock right now. The S&P 500 trades at a forward P/E of 20, meaning Nvidia's stock isn't priced much higher than the market. That's odd to say, as Wall Street analysts expect Nvidia's revenue to increase by 56% this year and 23% next year. Both growth rates are far higher than the broader market's typical growth rate, which is a bullish sign for long-term investors.
While short-term economic fears may be scary, investors should focus on the long term to overcome those worries. If you can do that, it's clear that many stocks are bargain buys right now, with Nvidia being one of them.
