There is no doubt about that Nvidia (Nasdaq: NVDA) He has been the leader of the Artificial Intelligence (AI) revolution so far. The stock has jumped nearly 10 times since the beginning of 2023, shortly after ChatGPT was launched.
It rose to become the world’s most valuable company this year, although it has since relinquished that position to apple. Nvidia’s strength was on display in its latest earnings report as the company posted another round of impressive results. Revenue jumped 94% to $35.1 billion, and adjusted net income more than doubled to $20 billion, or $0.81 per share.
Nvidia shares peaked after its third-quarter earnings report on November 21 at a share price of $152.89. However, something surprising happened shortly afterwards. Nvidia stock began to decline even as the broad market continued to rise as investors seemed to believe that valuation had become highly inflated again. As of December 17, less than a month later, the stock is now down 15% from that peak after falling for four consecutive sessions in a row.
There was no major news that caused Nvidia to decline and no particularly big one-day moves. Perhaps the biggest element is that China has opened an antitrust investigation into the company, according to Bloomberg, in connection with its 2019 acquisition of Mellanox, which makes networking products for servers and storage equipment.
Concerns about a shift in AI spending away from Nvidia’s core, increased competition, and the fact that AI has yet to penetrate at the consumer or end-user level have weighed on the stock.
The stock also pulled back after that Broadcom It provided strong guidance for AI in its fiscal fourth-quarter earnings report last week. While Broadcom doesn’t compete directly with Nvidia, its results, which included 220% growth in AI in 2024 and guidance for 65% growth in the first quarter, show that the spoils in the AI race may finally be starting to spread beyond Nvidia.
Investors, especially those with big profits in Nvidia, may finally feel it’s time to diversify into other chip stocks.
Although the stock fell after the initial earnings rise, Nvidia’s prospects still look as strong as they did when the company reported earnings a month ago.
The hectic issues that delayed the launch of the new Blackwell platform have been resolved and continue to see demand significantly outpace supply for its new components. CEO Jensen Huang called demand for Hopper and the new Blackwell platform “incredible,” and CFO Colette Kress said demand for Blackwell will exceed supply for several quarters through fiscal 2026, or the next calendar year.
Meanwhile, Nvidia’s guidance for the fourth quarter calls for business as usual as the company expects revenue of about $37.5 billion, up 70% from the year-ago quarter, reflecting strong sequential growth in the business.
Nvidia’s decline in recent weeks comes as its competition continues to weaken. Intel CEO Pat Gelsinger was pushed into retirement earlier this month, leaving the company without a permanent CEO, another sign of disarray at the legacy chipmaker. Meanwhile, Advanced micro devices It lowered its guidance in its latest earnings report.
Both companies have launched competitors to Nvidia’s data center GPUs, but it seems unlikely that they will make significant inroads into Nvidia’s lead, especially as Nvidia continues to innovate at a rapid pace. Not only is Blackwell now in full production, but its next platform, Rubin, is already in development.
Looking at it from this perspective, the recent sell-off looks like a buying opportunity for Nvidia. Its growth prospects remain as strong as they were a month ago. The competitive threat appears to have weakened, and investors are generally optimistic in 2025, as AI is expected to expand into software, and there are high hopes that the Trump administration will reduce regulations.
Nvidia is now trading at Forward price-earnings ratio Of 44 based on this year’s consensus, which seems like a great price for a company growing this quickly. Nvidia continues to strengthen its competitive advantages, and while its growth should continue to moderate, its valuation leaves room for continued gains. The stock still looks like a buy, especially after the post-earnings pullback.
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Jeremy Bowman He has positions at Broadcom. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Intel, and Nvidia. The Motley Fool recommends Broadcom and recommends the following options: Short February 2025 $27 calls on Intel. The Motley Fool has Disclosure policy.
Down 15%, can Nvidia stock be bought now? Originally published by The Motley Fool