Since the beginning of May, investors have been tossing semiconductor stocks out the window. The Philadelphia Semiconductor Index has fallen by more than 20%, but some individual chip stocks have fallen much more sharply -- even those that appear to have great long-term prospects. Motley Fool Stock Advisor recommendation NVIDIA (NASDAQ:NVDA) has seen its shares plunge by more than 40% in just two-and-a-half months. To me, all this selling seems to provide a great buying opportunity.

NVIDIA makes graphics chips for computers, gaming consoles, and handheld devices. Delays in the Sony (NYSE:SNE) PlayStation 3, which will use NVIDIA graphics chips, and Microsoft's (NASDAQ:MSFT) Windows Vista operating system, which could drive consumer demand for new computers and components, have certainly contributed to the slide in the shares. To that list, we may as well add concerns about consumers' weakening spending, as well as a worrying buildup of inventory and accounts receivable during the first quarter of this year. While each of these issues is relevant over the short term, now that the share price has fallen so much, I think investors would be wiser to focus on the long-term outlook.

We know that both the PS3 and Windows Vista will eventually be launched, and both should benefit NVIDIA. Vista, for example, includes lots of neat video enhancements that even many one-year-old PCs won't be able to handle -- unless the owner spends a few bucks to plug in a new graphics card.

Furthermore, NVIDIA is pursuing the mobile market with some success. For example, Motorola's (NYSE:MOT) RAZR phone uses an NVIDIA chip. While growth in cell-phone sales is slowing (roughly a billion should be sold this year), growth in video-enabled cell phones (and video-enabled mobile devices in general) has a long way to go. There's plenty of competition in the mobile device market, including companies like ATI Technologies (NASDAQ:ATYT), Broadcom (NASDAQ:BRCM), and Texas Instruments (NYSE:TXN), but with a billion cell phone sales per year, there is room for multiple players.

Another growth driver is high-definition video. Both the HD-DVD and Blu-ray flavors of high-def home video will drive video processing requirements to new heights. This means that if you want to watch a high-definition video on your computer, or on a television connected to a Media Center PC, you'll need a much more powerful video card compared to that required for an ordinary DVD. A measure of NVIDIA's competitiveness in this market was evident during the last quarterly conference call, when management stated that it has, to its knowledge, won every significant OEM design for HD-DVD and Blu-ray.

I can't claim to know what the share price will do over the short term, but I think that the long-term outlook still looks very promising, even though the price is a heck of a lot lower now. I also know that this company has nearly $1 billion in cash on the balance sheet with no debt, which means that it has the financial strength to withstand a downturn. Investors seeking to take advantage of the recent semiconductor malaise may want to consider NVIDIA.

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Microsoft is a Motley Fool Inside Value recommendation, while NVIDIA is a Motley Fool Stock Advisor pick. Whatever your investing style, the Fool has a newsletter for you.

Fool contributor Dan Bloom has no financial interest in any stock mentioned in this article.