Opportunity to Buy Nvidia Stock Amid Pullback?

Nvidia Stock

In the dynamic realm of the stock market, timing plays a pivotal role. Nvidia Inc. (NASDAQ:NVDA), a dominant player in semiconductors and artificial intelligence (AI), has witnessed a remarkable ascent since October 2022, soaring from $108 per share to a peak of $974 in early March 2024. However, a recent pullback of approximately 18% from its all-time high has prompted investors to ponder: Is this dip an opportune moment to acquire Nvidia shares?

Let’s delve into whether the recent decline presents an optimal entry point to capitalize on Nvidia’s long-term growth trajectory.

Recent Developments for NVDA Stock

On April 22, Nikkei reported that SoftBank Group Corp (SFTBY) intends to invest 150 billion yen ($960 million) by 2025 to enhance its computing facilities, aiming to equip them with cutting-edge generative AI capabilities. Nvidia’s graphics processing units (GPUs) are slated to be procured for this endeavor.

Additionally, on April 15, Evercore ISI initiated coverage of Nvidia with an “Outperform” rating and a price target of $1,160. The firm underscored the undervaluation of Nvidia’s established chip, hardware, and software ecosystem, projecting robust returns over the long term.

Earnings Outlook for Nvidia

Nvidia reported stellar earnings results for Q4, with revenue surging 265.3% year-over-year to $22.1 billion, exceeding expectations by $1.55 billion. The company’s earnings per share reached $5.16, surpassing estimates by approximately 10% and marking a 28% increase from the previous quarter.

The robust performance was primarily driven by the data center segment, which experienced 27% sequential growth and a remarkable 409% year-over-year increase. Demand for training and inference of generative AI and large language models (LLMs) fueled this growth, leading to Nvidia’s fifth consecutive quarter of significant outperformance.

Analysts anticipate a staggering 484.09% surge in earnings to $5.14 per share in fiscal Q1 of 2025, with revenue expected to rise to $24.31 billion, indicating a 237.97% year-over-year increase.

Assessment of Nvidia’s Value

Nvidia currently trades at approximately 32x consensus 2025 earnings and 26x 2026 earnings, which appears reasonable considering its robust growth trajectory. With a commanding 90% market share in AI-related chips and the global AI market projected to soar to $827 billion by 2028, Nvidia’s prospects seem promising.

However, risks include the potential slowdown in GPU demand as the initial AI LLM training phase decelerates, heightened competition from players like Advanced Micro Devices (NASDAQ:AMD), and regulatory challenges impacting sales in key markets.

Options Market Sentiment and Analyst Consensus

Analysis of the options market for NVDA indicates a stronger inclination towards call options at the $800.00 strike price, suggesting an anticipated uptick in the stock price.

Out of 40 analysts covering NVDA stock, the consensus overwhelmingly leans towards a “strong buy,” with a mean target price of $948.73, representing a 19% upside potential from the current price.

Final Assessment

Considering Nvidia’s impressive growth prospects in both the short and long term, the recent downturn presents an enticing opportunity for investors to acquire a high-quality stock at a potentially discounted price, particularly for those mindful of its lofty valuation in recent times.

Featured Image: Megapixl

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