Nvidia’s Recent Stock Drop: A Long-Term Buying Opportunity

Artificial intelligence (AI) stocks have faced significant sell-offs recently, with Nvidia (NASDAQ: NVDA) experiencing a notable decline of around 30% from its peak. However, rather than signaling a downturn, this pullback presents a potential buying opportunity for long-term investors.

Below are five compelling reasons why Nvidia remains a strong contender in the AI space, indicating that its future growth potential is still robust.

1. Early Stages of AI Adoption

Nvidia specializes in manufacturing graphics processing units (GPUs) that are essential for AI training and inference. These GPUs excel at parallel processing, allowing for the simultaneous execution of multiple tasks, which is vital for complex activities such as AI model training. By clustering GPUs together, users can significantly enhance performance, cementing their status as the go-to hardware for AI endeavors.

Despite significant investments in AI computing, we remain early in the AI adoption timeline. Major tech players, known as AI hyperscalers, are predicting record spending on AI-related infrastructure by 2025, signaling that the development of supportive technology is far from complete. Investors should recognize that AI represents a long-term shift in operational methodologies rather than a fleeting trend.

2. Blackwell Architecture Catalyzes Future Growth

Nvidia is advancing its chip technology with the innovative Blackwell architecture, which succeeds the highly successful Hopper architecture. Notable improvements include a fourfold increase in AI model training speed and 30 times faster inference capabilities. This leap in technology is critical as emphasis shifts from training AI models to their practical application.

As Blackwell GPUs set new industry standards for AI training, Nvidia’s commitment to ramping up production is anticipated to drive substantial growth.

3. Continued Revenue Growth Prospects

Nvidia has demonstrated remarkable revenue growth over the past two fiscal years—265% year-over-year in fiscal 2024, followed by 114% in fiscal 2025. Projections for fiscal 2026 suggest a 56% growth rate. While the rate of growth may appear to be declining, this reflects the law of large numbers rather than a diminishing demand.

For context, Nvidia’s revenue surged by $34 billion in fiscal 2024, followed by a $70 billion increase in fiscal 2025. If analysts’ predictions hold true, fiscal 2026 could see a revenue rise of $74 billion, indicating sustained and growing demand for AI capabilities.

4. Margins Expected to Improve

Concerns have arisen regarding Nvidia’s gross margin projections, particularly the expected dip at the start of the year. Analysts worried that this indicated a loss of pricing power and an inclination toward price reductions. However, Nvidia’s management clarified that the anticipated decline stems from the initial ramp-up of Blackwell production, which often incurs more inefficiencies in the early stages.

Over the course of the year, Nvidia aims to enhance production efficiency, suggesting that gross margins could recover to the mid-70% range by year-end. Investors should monitor this but avoid excessive alarm at the current margin fluctuations.

5. Nvidia Shares Currently Undervalued

The recent sell-off has positioned Nvidia’s shares at a more attractive price point. To find similar pricing volatility, one must look back to 2019. Despite the reduced trailing price-to-earnings (P/E) ratio, it’s vital to focus on Nvidia’s anticipated growth in fiscal 2026, where its forward P/E stands at 25, indicating a ripe opportunity for investment amidst shifting market dynamics.

This combination of factors makes Nvidia an appealing buy during this correction, promising long-term growth prospects driven by significant industry trends.

A Second Chance for Investors

Have you ever felt you missed out on profitable investments? Consider this your opportunity.

Our expert analysts occasionally issue “Double Down” stock recommendations for companies poised for significant gains. If you believe you’ve missed your chance, now might be the best time to invest. The data reveals compelling results:

• Nvidia: If you invested $1,000 when we doubled down in 2009, you’d have $277,401!
• Apple: A $1,000 investment from our 2008 recommendation would now amount to $43,128!
• Netflix: Investing $1,000 when we doubled down in 2004 would yield $467,393!

We are currently issuing “Double Down” alerts on three exceptional companies; this may be a unique chance.

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*Stock Advisor returns as of March 10, 2025

Keithen Drury 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.