Nvidia’s Recent Decline: A Potential Buying Opportunity

Tech stocks have experienced a turbulent few weeks, shifting from record highs to significant losses driven by concerns over tariffs and a looming recession.

Market Correction Overview

As of March 11, the Nasdaq Composite (NASDAQINDEX: ^IXIC) has declined by 13.6% from its closing peak on December 17, 2024. This tech-heavy index had been trading near all-time highs as recently as February 19, now officially in a correction, which is defined as a drop of 10% or more from a recent closing peak.

Investor Sentiment Impacted by Economic Indicators

Recent negative trends, such as weakening consumer sentiment, fluctuating tariffs imposed by U.S. President Donald Trump, and downgraded guidance from major airline companies like Delta Air Lines, have understandably rattled investors.

Despite the uncertainty in the stock market, long-term investors recognize that downturns can present solid buying opportunities.

Nvidia’s Noteworthy Decline

Amid this backdrop, one stock has captured investor attention—Nvidia (NASDAQ: NVDA). Recently, Nvidia has seen the most considerable market-cap loss, with approximately $1 trillion in market value disappearing since its peak earlier this year. This downturn followed mixed reactions to the company’s fourth-quarter earnings report, as well as macroeconomic concerns regarding consumer confidence and global growth.

Currently, Nvidia is down 27% from its earlier 2023 peak. This drop may set the stage for an attractive buying opportunity for investors in this fast-growing semiconductor sector. But should buyers enter the market now, or is it wiser to wait for stabilization? A closer examination of Nvidia’s prospects is warranted.

Image source: Getty Images.

The Nvidia Setup

Nvidia has faced difficulties due to recent headlines surrounding DeepSeek and the ROI from its AI technology. Nevertheless, the company’s growth trajectory remains impressive.

In the fourth quarter, Nvidia’s revenue skyrocketed by 78% to $39.3 billion. Although this represents a slower growth rate than in previous quarters, it continues to outpace that of any other company of its size. The company projects approximately $43 billion in revenue for the first quarter, equating to 65% growth from the previous year.

With these strong figures, investors should be optimistic about Nvidia’s immediate outlook. The company is also in a favorable position for medium-term growth, as demand for its new Blackwell platform significantly outweighs supply. Nvidia is accelerating production of new components, aiming to enhance output faster than it has for any prior product.

Looking further ahead, Nvidia’s long-term outlook is promising. Even a global recession is unlikely to derail the race toward artificial general intelligence (AGI), with Nvidia’s cutting-edge technology poised to foster innovations investors cannot yet fully grasp. The semiconductor industry has thrived over the last decade, and demand for semiconductors powering everything from data centers to smart appliances to self-driving vehicles seems destined to increase in the coming years.

Is Nvidia a Buy?

In the short term, any stock may decrease in value, and Nvidia is no exception. Given the cyclical nature of the semiconductor industry, the stock may respond unfavorably to signs of economic slowdown.

However, in light of its prospects already mentioned, Nvidia also appears relatively inexpensive following this recent downturn. The stock trades at a forward price-to-earnings (P/E) ratio of approximately 24, comparable to the S&P 500‘s forward P/E of 20.7.

Considering Nvidia’s resilience against tariffs and sustained demand for its leading products, the stock may represent a solid investment opportunity at this moment. Long-term investors should not let short-term volatility deter them from taking advantage of Nvidia’s nearly 30% decline from its peak; it currently stands as an attractive buy.

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Jeremy Bowman has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool also recommends Delta Air Lines. See the Motley Fool’s disclosure policy.

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