Nvidia’s Stock Drop: Reasons to Consider Buying Now

Nvidia (NASDAQ: NVDA) has faced significant struggles in 2025, with shares down 15% year to date. However, there are indications that this selloff might be overstated.

The decline in stock price is attributed to several factors. Concerns include potential reductions in artificial intelligence (AI) hardware spending following the launch of DeepSeek’s affordable AI model, economic uncertainties stemming from President Donald Trump’s tariffs, and rising competition in the AI chip sector.

Some of these fears appear exaggerated.

Here are three compelling reasons why Nvidia is still a strong pick in the current market landscape.

Source: Getty Images

1. Strong AI Spending Across the Sector

Nvidia’s stock suffered a blow in January after Chinese AI startup DeepSeek announced it trained its R1 reasoning model at a fraction of the cost major tech firms spend on their large language models (LLMs). This led to concerns that buyers of Nvidia’s graphics processing units (GPUs) might reduce orders.

However, demand has remained resilient. In February, Nvidia reported solid fiscal 2025 fourth-quarter results. Management provided optimistic guidance, projecting revenue of $43 billion for the first quarter of fiscal 2026, a 65% year-over-year increase.

This growth is notable given Nvidia’s already substantial sales base. The company ended fiscal 2025 with $130.5 billion in total revenue, more than doubling its figure from the prior year. Management credited its positive outlook to strong demand for the latest generation of Blackwell AI GPUs, which exceeded revenue expectations last quarter.

Looking ahead, Nvidia is positioned to report another robust quarter this month. Major firms like Meta Platforms, Microsoft, and Alphabet have commented on solid spending for AI data centers.

For example, Meta raised its 2025 capital expenditure guidance by nearly 9% to $68 billion, focusing on enhancing its AI infrastructure. Microsoft plans to allocate $80 billion in capital expenditures for fiscal 2025 and anticipates increased spending due to AI capacity issues.

Meanwhile, Alphabet has reaffirmed its $75 billion capex guidance for 2025, representing a 43% rise from the previous year. Consequently, Morgan Stanley projects a significant boost in sales for Nvidia’s Blackwell processors, estimating $30 billion for Q1, nearly triple the fiscal 2025 fourth-quarter revenue.

2. Nvidia Maintains Dominance in AI Chips

Concerns about competitors undermining Nvidia’s growth trajectory seem misplaced. The chipmaker continues to lead the AI chip market decisively. Last fiscal year, Nvidia sold $115 billion worth of data center chips, far surpassing Advanced Micro Devices (AMD) and Broadcom, which recorded estimated data center GPU sales of $5 billion and $12.2 billion, respectively.

Intel has struggled to make significant headway in the data center chip sector, with revenue from its data center and AI segment up only 8% to $4.1 billion in the first quarter of 2025—indicating a projected annual revenue of $16.4 billion. Nvidia is anticipated to maintain a 77% share of the AI semiconductor wafers produced this year, an increase from 51% in 2024. This trend suggests Nvidia will dominate the AI chip market well into the future, supported by an anticipated annual growth of 35% in the AI chip sector through 2033.

3. Attractive Valuation Makes It a Good Time to Invest

The decline in Nvidia’s stock price this year, along with its impressive growth rate, presents an appealing valuation for investors. Currently, Nvidia’s stock trades at 38 times trailing earnings, a drop from a price-to-earnings ratio of 62 in late January. Additionally, the forward earnings multiple of 25 suggests potential for a substantial increase in net income, notably lower than the tech sector’s average earnings multiple of 42.

Analysts forecast a 48% rise in Nvidia’s earnings for the year, significantly outpacing the 8% growth expected among S&P 500 companies. Nvidia’s strong growth potential may even exceed these expectations, especially as margins improve in the latter half of the fiscal year with increased production of Blackwell processors.

In summary, investing in this AI stock appears highly appealing given its attractive valuation, strong position in AI chips, and robust tech sector spending on AI infrastructure.

Conclusion: A Second Chance for Savvy Investors

If you think you missed out on great investment opportunities before, it’s worth considering Nvidia now.

Occasionally, experts identify specific companies ripe for significant growth. If you believe you’ve missed your chance to invest in a promising company, the current market situation may present one of the best opportunities to act.

• Nvidia: A $1,000 investment when we doubled down in 2009 would now be worth $303,566!
• Apple: A $1,000 investment in 2008 would be $37,207!
• Netflix: A $1,000 investment when we doubled down in 2004 would have grown to $623,103!

Right now, analysts are issuing alerts on three top companies, and it may be a fleeting opportunity to take advantage of.

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