NVIDIA (NASDAQ:NVDA) has become synonymous with the AI rally that has lifted everything from data center stocks to software stocks, and even those with minimal involvement in machine learning and artificial intelligence.
The stock has fallen off its peak recently as Wall Street’s enthusiasm has waned amid antitrust probes, U.S.-China trade restrictions, and whispers of customer double-ordering. Rivals haven’t really gained much ground either, as Warren Buffett says, the tide has to go out first before you can realize who’s been swimming naked.
No matter what data you look at, it’s hard to argue that NVDA stock is not a buy at these levels. It is a solidly profitable tech darling growing at triple-digit rates, and the hardware + software stack it has is basically unchallenged in the AI space.
Most of the problems it is facing now are man-made instead of an industry-wide slowdown like bears would have expected. Chip restrictions to China have already caused a $5.5 billion charge and could cause billions in lost revenue down the line. Man-made problems are still problems nonetheless, so you should account for them when buying the stock.
Currently, NVIDIA derives over half of its revenue from abroad. 13.1% is from China directly. That’s plenty of risk, but not enough to completely erode the opportunity here. You’re paying 22 times forward earnings, which is very cheap compared to most other AI stocks. Even if NVIDIA continues its trend of beating estimates by narrower figures, it’s hard to see the stock stay at these levels for too long.
The broader AI industry is still growing, and there are no indications yet that there has been a notable slowdown. Until then, I’d keep my Buy rating on the stock. You may still take some losses this year on NVDA, but the long-term prospects are juicy if you accumulate on the way down.
The consensus price target of $165.7 implies 67.6% upside.
