Investing in Turbulent Times: Why Nvidia is a Bargain Now
What should a savvy investor do when the stock market is in turmoil? The answer is clear: buy stocks.
As major stock indexes experience a significant downturn, it’s essential to stay calm and identify potential opportunities to acquire shares at lower prices.
Investing $1,000 Right Now? Our analysts have pinpointed the 10 best stocks to buy at this moment. Learn More »
To get straight to the point, one stock that I believe is currently undervalued is Nvidia (NASDAQ: NVDA). Here’s why.
Image source: Getty Images.
Nvidia Shares: A Discounted Opportunity
One effective strategy for navigating the tumultuous stock market is to view sell-offs as opportunities. For instance, when my favorite clothing store offers discounts of 20%, 30%, or even 50%, I don’t question the reasons behind the markdowns. Instead, I appreciate the savings.
This mindset can be applied to the stock market as well. Various factors contribute to market declines, yet investors should focus less on the causes and more on capitalizing on the chance to buy shares at a lower cost.
Take Nvidia, for example. Currently, shares are trading at approximately $107 each, representing a 26% drop from its all-time high of $149. This decline marks the third-largest dip from an all-time high in the past decade.
Consider what would have happened if an investor had purchased Nvidia shares during previous downturns. Back in 2018, the stock fell over 50% from its previous peak. Similarly, in 2022, Nvidia plummeted around 66% from its all-time high.
Investing $10,000 in Nvidia in January 2019 would have grown to approximately $330,000 today, even with the recent 26% decline factored in.
Likewise, a $10,000 investment made in Nvidia shares at the beginning of 2023 would be valued at nearly $80,000 today, again taking into account the recent drop.
In essence, past significant declines in Nvidia’s stock have proven to be prime buying opportunities. But will this time follow suit? I believe it will, and here’s why.
Nvidia’s Valuation Approaches Historic Lows
Currently valued at $2.8 trillion, Nvidia ranks as America’s third-largest company. This represents a notable change since 2019 and 2022. The stock price surge reflects the company’s remarkable performance.
Nvidia’s earnings have soared. For instance, in 2018 and early 2023, the company reported approximately $0.18 in diluted earnings per share (EPS), which increased to $2.94 last year.
NVDA EPS Diluted (Annual) data by YCharts.
When you evaluate Nvidia’s stock in the context of its impressive earnings growth, the current buying opportunity becomes even more appealing.
Nvidia’s price-to-earnings (P/E) ratio has dropped to 39 times, one of the lowest levels since 2019, significantly below its 10-year average of 60 times.
NVDA PE Ratio data by YCharts.
In conclusion, Nvidia’s shares are presenting an attractive opportunity for investors willing to recognize it. Growth-focused investors should carefully consider this situation.
Is Now the Time to Invest $1,000 in Nvidia?
Before purchasing stock in Nvidia, take the following into account:
The Motley Fool Stock Advisor analyst team has identified the 10 best stocks to buy right now, and surprisingly, Nvidia does not make the list. The stocks that were selected have significant potential for substantial returns in the coming years.
For example, if you had invested $1,000 in Netflix when it was recommended on December 17, 2004, you’d now have $509,884! Similarly, Nvidia’s stock was recommended on April 15, 2005, and a $1,000 investment is now worth $700,739!
It’s important to note that Stock Advisor‘s total average return stands at 820%, compared to just 158% for the S&P 500. Ensure you don’t miss the latest top 10 list available with a subscription to Stock Advisor.
*Stock Advisor returns as of April 10, 2025
Jake Lerch has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.
