Why Nvidia Stock is a Smart Long-Term Buy Amid Correction

The Nasdaq Composite (NASDAQINDEX: ^IXIC) has entered correction territory, meaning it has fallen at least 10% from its all-time highs. A major factor behind this decline is Nvidia (NASDAQ: NVDA), which has dropped around 20% year-to-date as of this writing. Although the chipmaker recently reported impressive results, investor anxiety surrounding tariffs and potential recession risks in the U.S. has unsettled the market in the short term.

For long-term investors eyeing Nvidia, this price correction offers a prime opportunity to acquire shares at a lower cost. Here are three compelling reasons why Nvidia stock is a must-buy during this dip.

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1. Nvidia’s Dominance in AI Infrastructure

Nvidia holds approximately 90% of the market share for graphics processing units (GPUs), underscoring its leadership position in supplying the artificial intelligence (AI) infrastructure. Initially designed to enhance graphics rendering in video games, Nvidia’s GPUs have proven ideal for training large language models (LLMs) and AI inference tasks due to their rapid processing capabilities.

The company’s CUDA (Compute Unified Device Architecture) platform has fortified its competitive advantage. Notably, Nvidia allowed programmers to use GPUs for tasks beyond their original intent back in 2006, establishing a strong foothold in the developer community. In contrast, rival Advanced Micro Devices (NASDAQ: AMD) launched its ROCm (Radeon Open Compute) software platform a decade later, in 2016.

As of now, Nvidia has developed a comprehensive software stack under CUDA-X, consisting of libraries, microservices, and tools specifically designed to advance AI and high-performance computing applications. A recent evaluation by semiconductor research firm Semianalysis revealed that AMD’s latest GPUs were ineffective for AI training due to software flaws, further solidifying Nvidia’s superior position in the AI space.

Image source: Getty Images

2. Steady Growth of AI Data Center Infrastructure

While Chinese AI firm DeepSeek touts low-cost AI model development, the prevailing trend favors enhancing AI models through significant computational power. This involves expanding systems with increasingly larger AI chip clusters.

The latest iterations of AI models require vastly more GPU chips compared to earlier versions. For instance, strong demand has driven Meta Platforms‘ Llama 4 model to require tenfold the GPUs used for Llama 3. Similarly, the Elon Musk-backed xAI started with 100,000 GPUs for Grok 3 before doubling that number to 200,000.

Moreover, leading cloud computing and technology companies are investing heavily in AI data center infrastructure. The top three cloud providers are set to spend a total of $255 billion building AI data centers this year to accommodate increased demand.

In a similar vein, Meta plans to allocate up to $65 billion towards capital expenditures, primarily for enhancing its AI infrastructure. Additionally, a consortium led by OpenAI and Softbank has committed to invest $500 billion over the coming years to expand AI data centers in the U.S. through Project Stargate.

These factors indicate sustained growth in AI infrastructure spending, positioning Nvidia favorably for continued success.

3. Attractive Valuation of Nvidia Stock

Another key reason to invest in Nvidia is its current valuation, which remains attractive. The stock trades at a forward price-to-earnings (P/E) ratio of 24 based on 2025 analyst estimates and has a price/earnings-to-growth (PEG) ratio below 0.5. Typically, PEG ratios under 1 signal that a stock is undervalued, whereas growth stocks usually have PEGs greater than 1.

Data by YCharts.

While Nvidia is not a software-as-a-service (SaaS) company, which commands higher valuation multiples due to predictable revenue, its current metrics remain low. Given the nascent stage of AI development and a trajectory of increasing AI infrastructure spending, Nvidia’s recent pullback appears to present an advantageous long-term buying opportunity.

Don’t miss this potential second chance

Do you ever worry about missing out on high-performing stocks? If so, take note.

Occasionally, our analyst team makes a special **“Double Down”** stock recommendation for companies primed for growth. If you’re concerned you’ve overlooked your chance to invest, now could be the opportune moment before conditions change. The data is compelling:

• Nvidia: An investment of $1,000 when we issued a double down in 2009 would be worth $292,207 now!*
• Apple: Investing $1,000 when we doubled down in 2008 would have grown to $45,326!*
• Netflix: If you had invested $1,000 when we doubled down in 2004, you could see $480,568!*

At present, we are issuing “Double Down” alerts on three exceptional companies, and opportunities like this might not arise again soon.

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*Stock Advisor returns as of March 10, 2025

Randi Zuckerberg, a former director of market development at Facebook and sister to Meta Platforms CEO Mark Zuckerberg, sits on The Motley Fool’s board of directors. Geoffrey Seiler does not hold positions in any of the stocks mentioned. The Motley Fool has investments in and recommends Advanced Micro Devices, Meta Platforms, and Nvidia. Please see The Motley Fool’s disclosure policy for more information.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.