Nvidia (NVDA 1.39%) was one of the top stocks to own in 2023, 2024, and 2025. In 2026, it hasn't been so rewarding. Although it's up around 10% so far, the S&P 500 (^GSPC +0.00%) is up by nearly 9%. So, its shareholders are barely beating the market despite the chipmaker's growth rate and its dominance in one of the most critical parts of the artificial intelligence (AI) build-out. Nvidia is also down by more than 10% from the all-time high it established in early May.
Historically, sell-offs of 10% or more have been excellent times to buy the dip on Nvidia stock. So, is now a perfect time to buy it?
Image source: The Motley Fool.
Nvidia's growth remains strong
Nvidia became the world's largest company thanks to insatiable demand for its graphics processing units (GPUs). These accelerated computing units are powerful parallel processors that are ideal for handling a wide range of computationally intense workloads rapidly. While GPUs have been utilized in a variety of computing workloads over the past 30 years -- including video game graphics and cryptocurrency mining -- their largest use case to date has been AI computing. Specifically, Nvidia's GPUs have become the industry standard, and they are the benchmark that every new AI computing unit is compared to.
Nvidia's computing hardware is also universal, as every major cloud provider offers it. This keeps aspiring AI firms from being locked into unreasonable computing contracts using proprietary chips from the AI hyperscalers, and will keep Nvidia a viable option even as more custom AI chips enter the AI computing scene.
NASDAQ: NVDA
Key Data Points
This ubiquity of Nvidia's chips in data centers and the ongoing AI build-out are routinely visible in Nvidia's results; in its latest quarter, it delivered impressive 85% year over year growth.
Nvidia management is bullish on the long-term outlook as well, projecting that AI infrastructure spending will reach $1 trillion in 2027 and rise to $3 trillion to $4 trillion annually by 2030. That's huge growth in store for Nvidia, and makes the long-term investing picture quite positive. Despite that, the market hasn't priced any of 2027's expected growth into the stock.
NVDA PE Ratio (Forward) data by YCharts.
At 22.9 times forward earnings, it's barely more expensive than the S&P 500, which trades for 21.5 times forward earnings. When next year's forecast results are factored in, its valuation falls to a mere 16 times forward earnings. That primes Nvidia to rise throughout the rest of 2026, particularly once more AI hyperscalers start revealing their 2027 capital expenditure budgets.
That makes Nvidia an excellent stock to buy now, as I think its performance across the rest of 2026 could be quite strong as it rallies from its currently modest valuations.
